What Your Home Office Deduction Does — And Doesn’t — Have To Be

Do you work from home as an independent contractor or small business owner? If so, you may be entitled to the home office tax deduction. However, many people are confused about how the home office deduction works. Should you be afraid of claiming it? And what should you know to avoid trouble with the IRS? To help you make the best decision, here are a few things this claim does or does not have to be. 

It Does Not Have to Be an Office

Just because this tax deduction is called the home office deduction doesn't mean it must only be an actual home office. It may generally be any work area in which you regularly conduct a significant portion of your work. This includes inventory storage, videoconferencing, a workshop, client meeting spaces, or packaging assembly lines. 

It Does Have to Be Exclusive

One key rule of claiming a home office is that the space is exclusive to your business work. If you claim your entire spare room as a home office, it cannot also serve as a kids' playroom, a guest room, a gaming room, or even home storage. It doesn't have to be the only place you work, but only work can occur there and it must be your primary work location. 

It Does Not Have to Be Complex

Are you worried about claiming the tax deduction because you don't know how to figure it out? Don't let this hold you back. Current rules allow the taxpayer to use a straight dollar amount per square foot of the workspace. So if your home office measures 10 feet by 10 feet, your deduction is the dollar amount multiplied by 100. While taxpayers continue to have the option of longer calculations based on home expenses, this simplifies things for many. 

It Does Have to Be a Whole Structure

Some people prefer to work in a detached outbuilding on their property. Perhaps you use a detached garage or fancied up your shed to serve as an office. In this case, as with interior spaces, the space must only be devoted to business activities. However, unlike other spaces, the entire detached structure must be in use for business. Therefore, you can't use half your shed office for relaxation and half for remote work. 

Where to Find Help

Do you still have questions about the home office deduction and your particular business activities? If so, start by meeting with an experienced accountant in your state who specializes in tax preparation. With their guidance, you'll be able to take advantage of this valuable deduction and avoid any concerns about the IRS. 

Contact a tax preparation service to learn more.