Can your home office expenses be deducted?
Working from home has its perks. It cuts down on nasty commute times, allows people to spend more time with family and less time in traffic, saves money on gas and even helps people concentrate better at their jobs.
If you work from home you’re probably already aware of these benefits, but did you know that there are tax perks too? If not, that’s why we’re here. We’re the tax experts that can help save you even more money this year. To figure out if you qualify, continue reading our four work-from-home tax tips below.
1. Know Who Qualifies
In most cases, freelancers and independent contractors, and business owners (that use a home office) are able to deduct any home office-related expenses incurred throughout the year. Some common types of expenses include things like tech equipment (computers, laptops, headphones, etc.), printers, notebooks, pens, etc. Note that these types of expenses need to be justified as being ‘ordinary and necessary’ to qualify.
Those who own their business and solely work from home might also be able to claim other home-related expenses. For example, things like mortgage interest, property taxes, home insurance, and utilities. But, these can only be claimed if the home is used exclusively and regularly for the business.
Unfortunately, if you are an employee at a company and are working from home you won’t qualify for these types of deductions even if you’ve made the switch from working in-office to working from home.
2. Consider the Exceptions
Although most employees do not qualify for any work-from-home tax deductions there are a few expectations. For example, the IRS offers people that are deemed to be ‘educators’ to get up to $250 in reimbursed expenses. However, knowing who qualifies for these exceptions can be tricky to determine which is why it’s best to speak with a financial professional before filing.
3. Keep Proof
If you qualify for the work-from-home deduction you will need to keep all of your receipts and invoices from the year. That’s because the IRS has some pretty strict guidelines outlining what counts as an expense and what does not. If you do not have proof and are questioned on an expense, you might be pulled in for an audit, since you won’t be able to prove that what you bought was ‘ordinary and necessary’ to do your job. The IRS further defines expenses as needing to be something that is common and accepted in the industry you work in.
To prevent the IRS from questioning you, keep track of business expenses throughout the year by photographing, downloading, and saving them to a secure online place. That way, you always have a copy of the receipt and can make notes about the items purchased to justify why they were needed for your job.
4. Know Where to Apply
Once you’ve read up on all there is to know about work-from-home taxes you will need to apply. This process is not difficult if you know where to go. Those who qualify will need to file a Schedule C and fill in the line items for their expenses. To figure out how much you are allowed to expense, use Form 8829 to calculate. Or, consider seeking the help of a professional who can fill the forms out on your behalf.
If you’re still confused if you qualify for a work-from-home tax break, or are struggling to keep track of all your receipts, consider getting some professional help by speaking with us at 407-328-5001.
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