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Optima Tax Relief Explores Tax Benefits when Working from Home

Taxpayers choosing to work from home could qualify for certain tax breaks from the IRS. Optima Tax Relief explores how taxpayers can become eligible for the home office deduction and what they can claim under this deduction when it comes time to file their 2020 tax return next year.

 

What are the basic requirements in order to qualify for the deduction?

There are two requirements that taxpayers must meet in order to be considered for the home office deduction. The first requirement is that a taxpayer must have a designated portion of their home that is for conducting business on a regular basis.

The second requirement that a taxpayer must meet is that their home must be the principal place of business. A taxpayer can also meet this requirement if they perform administrative or management activities from their home. It is also important to note that if there is a separate structure that isn’t attached to a house but is used exclusively as a place to conduct business, the IRS will also consider this as a home office deduction.

 

Additional information taxpayers should know about the home office deduction.

  • Employees don’t qualify for the home office deduction.
  • Certain expenses can be deducted by the taxpayer. I.E. mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent.
  • The deductible amount for certain expenses may be limited.

 

How to calculate your home office expense deductions.

There are two ways that taxpayers can calculate their expenses. The first option allows a rate of $5 per square foot that applies to a space in the home used for business purposes only. The maximum size for this option is up to 300 square feet meaning taxpayers can claim up to $1,500.

The second option is based on the percentage of the home that is used strictly for business purposes. Taxpayers who use a whole room or only part of a room for conducting business will need to figure out the percentage of the home or room that is used for business activities in order to deduct indirect expenses.

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