Because so many of us worked from home during the pandemic we might be entitled to home office deductions. So, just what is and is not tax-deductible?
Generally, you can’t deduct expenses related to the rent, purchase, maintenance, and repair of a personal residence. But if you use a portion of your home for business, you may be able to take a home-office deduction if you meet certain requirements.
Deductible expenses might include the business portion of real estate taxes, mortgage interest, rent, utility, insurance, depreciation, painting, and repairs.
Those who work out of their homes are entitled to deduct ordinary and necessary expenses related to the business.
Your deductions are limited to a specific area of your home that is used only for trade or business. And “regular use” means it’s used regularly, not just occasionally or incidentally.
And that’s important because both conditions must apply.
Also, if you work as someone’s employee, you can claim this deduction only if the regular and exclusive business use of the home is for your employer’s convenience, not yours, and your employer does not rent the business portion of your home. If your employer told you to work from home during the pandemic the employer’s convenience is established.
Here are some business uses that are acceptable for deductions:
You meet or deal with patients, clients, or customers there.
You have a separate, free-standing structure not attached to the home, such as a studio, garage, or barn that you use exclusively and regularly for your trade or business.
You have a separate, identifiable part of your home that you use regularly for storage, such as inventory or product samples, as rental property, or as a home daycare facility.
Remember that personal, family, and living expenses are not deductible under any circumstances.
A common error is to deduct expenses for a portion of the home that is not regularly used or exclusively used for business.
It’s important to understand the rules, compute the deductions correctly, and keep accurate records for these deductions. It is always advisable to consult with a tax professional.
Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues.