Home Office Deduction

John Doe is an accountant for Pizza Palace, Inc. With California under mandatory lockdown, due to the COVID-19 pandemic, John found himself forced to work from home for nearly all of 2020. He created a home office in his spare bedroom where he would work remotely. His friend, Paula Peterson, is a self-employed accountant who does taxes for individuals and businesses. She has always worked from home and takes the home office deduction on her taxes every year. John is now wondering if he qualifies for the home office deduction since he has been working from his home office this year.  He has never considered this option since he typically works from Pizza Palace’s headquarters office. Since COVID-19 restrictions have made money a little tighter, John really wants to take advantage of any and all deductions possible.   What can he do?

2020 was certainly a year rife with change. With tax season upon us, some of those changes bring with them new questions. If you are one of the many people who have been forced to work from home during the COVID-19 pandemic, you may be wondering if you now qualify for a home office deduction on your taxes. Unfortunately, unless you are self-employed, you likely will not qualify for a home office deduction as you need to have self-employment income to be eligible under the Tax Cuts and Jobs Act. Simply working from home full-time as a W-2 employee is not sufficient.

For those with self-employment income, you may qualify for the home office deduction if you use part of your home:

1. Exclusively and regularly as your principal place of business;
2. Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business;
3. If you use a separate structure which is not attached to your home, in connection with your trade or business;
4. If, on a regular basis, you use part of your home for business-related storage use;
5. For rental use; or
6. As a daycare facility.

The IRS publication 587 provides a helpful chart to help you figure out if you qualify.

Because you may have new circumstances that affect your tax liabilities, RJS Law is here to help you navigate your 2020 taxes. Give us a call to set up your consultation to make sure you have all your bases covered this tax season.

By Gwendolyn K. Davis

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