Since 2020, working from home has become all the rage. Here’s how to capitalize on using your space to receive a tax break.
Working from home has likely never been as ‘en vogue’ as it is today. 2020 made it a necessity, 2021 made it a priority. Now, as we work our way through 2022, working remotely has arguably become the preferred way for many to work.
Before the pandemic, some companies encouraged working from home, as they understood the benefits of work-life balance and productivity.
However, with the rise in the number of people working from home and New Media Influencers bursting onto the scene, the conversation has shifted from one of simple preference to one of retention and flexibility for small businesses and Influencers alike.
Key Remote Work Statistics
Although the work-from-home trend was largely fueled by the pandemic, it appears this trend is not going away anytime soon. In fact, here are some interesting work-from-home statistics that you should be aware of:
Advantages of Working from Home for Taxpayers
To be sure, there are numerous advantages in addition to being able to snuggle up to your pup or do a load of laundry while doing email. Here are a few:
What Types of Deductions are Available?
Business owners and Influencers who use their homes as offices can save some serious cash by taking the home office deduction, provided the IRS requirements are met and accurate and up-to-date records are available.
The IRS allows people who work from home to write off the associated rent, repairs, maintenance, utilities, and other related office expenses for home offices.
In fact, the home office deduction allows taxpayers to claim a share of their working costs from home. Such costs include internet charges, repairs, power bills, rent, and insurance.
The home office tax deduction is available for self-employed individuals working from home rather than renting office space. For eligibility, one must use a portion of their home regularly and exclusively for business.
Who Qualifies to Claim the Home Office Deduction?
Whether you own a home or rent, you can claim home office deductions. You can use the deduction for different residential homes, either in a single-family home, a condominium, a houseboat, or an apartment. But, you can’t use it for a hotel or other temporary lodgings. The good news is that hotel rentals are generally deductible as travel expenses assuming that such expenditures are for business related events.
The home office deduction applies to free-standing structures. However, you can also use a garage, studio, or a barn space for your home office provided the structure meets the conditions for a home office:
It is important to note that under the Tax Cuts and Jobs Act, Home Office Deductions are generally NOT permitted for Employees. There are exceptions to this rule but effective 2018 through to the 2025 tax year, only self-employed individuals (such as Sole Proprietors and S Corporation owners) may take this deduction.
How Can I Claim Home Office on Taxes?
Home office deductions can be claimed in two ways:
The simplified option makes it quick and easy to claim the home office deduction. It’s done by multiplying the office square-footage by $5. However, the maximum limit to claim is $1,500. On the other hand, the regular method applies based on the proportion of the used home office and related home expenditures such as rent, insurance, and repairs.
With the regular method of taking the home office deduction, if your home office takes up 10 percent of your home by square footage, then you would be able to deduct 10 percent of the home’s yearly expenses.
The burden of claiming the deduction is taken by the taxpayer. If an audit on the home office is done, one must back up the claims to the IRS.
How to Avoid Mistakes
Home Office Deductions as an Influencer
Influencers and other New Media business owners are usually considered to be self-employed by the IRS and thus eligible for the Home Office deduction and other useful business deductions. Influencers and New Media businesses can claim home office expenses for the room in a house used for business purposes such as writing or research.
In addition, the cost of office supplies such as stationary, desk chairs, laptops, cameras, cleaning supplies, calculators, among others, also matters in the home office deductions.
We Are Here to Help
Tax deductions for your home office can be difficult to understand. But, whether you are a content creator, self-employed, small local business, or a brand partner, do yourself a favor and bring in a professional who can help.
For more information, fill out the contact form here or call us at 866-736-2444, and we’ll find a solution for your business needs.