Your Top Questions About Using the Home-Office Deduction Answered
Tax season is upon us, and it’s time to think about how you can take your home-office as a tax deduction. Everyone knows that doing your taxes isn’t easy, and can often leave you feeling overwhelmed and anxious. Especially if you’ve paid good money to upgrade your space with high-quality office furniture. Don’t panic! Before you call your accountant this tax season, check out this quick guide on deductions for your home office.
Who Qualifies for a Home-Office Deduction?
The home-office deduction is generally used by small business owners and people who are self-employed. This includes freelancers, gig-workers, and business partners. You need to regularly use your part of your home or separate structure on your property only as your principal place of business. So, what counts as a home office? Take a quick look at what it means to use your office exclusively for business:
Exclusive Use Test
This handy test is a great way to help you decide if you’ve been using your home office for business only. Just ask yourself: Did I use this space for business 100% of the time? That means if the space you’re using is occupied, it’s being used for business purposes.
The good news is that this includes a multitude of business practices:
- Greeting Customers
- Inventory Storage
Unfortunately, if you’re trying to save space and use your home office for several purposes, you can’t use the home-office deduction. So, if your office is set up in your bedroom, kitchen, playroom, or any other space that’s used for something other than business, you may not be eligible to write-off your office.
It is possible to write-off a space in a room that is only used for business. If you can prove that you aren’t doing anything else while you work, you might take your home-office as a tax deduction. However, if there is any moment where you use that space for something other than running your business, like using your desk as a craft area, you may have to show substantial evidence that your home-office is for business exclusively.
Important: You don’t have to own your home to use the home-office deduction. If you rent an apartment, you can still write off your dedicated space and items like office furniture on your taxes. You can even use the home-office deduction on a house-boat. Just be ready to prove that you do most of your business from your boat-office, and that it has a devoted space just for work.
Can I Claim a Home-Office Deduction If I Receive a Paycheck From an Employer?
There has been some confusion over who qualifies for a home-office deduction over the past few years, because the rules and regulations for this tax write off have gone through some big changes. Unfortunately, if you receive a paycheck and a W-2 from an employer, your home-office is not eligible for a deduction.
The Tax Cuts and Jobs Act of 2017 removed employees from being eligible for home-office deductions from 2018 to 2025. Don’t worry, you’re not missing out on too much. The simplified deduction for home offices has a maximum of $1,500, which usually equates to a $525 write-off.
What Kind of Home-Office Deductions Are There?
You have two options when you’re looking to write-off home-office items like your dedicated space, computers, used office furniture, or supplies. One option may be better for you than the other, so it’s best to always reach out to a tax specialist before you make any final decisions. Here are the two ways you can write-off your home office on your taxes:
This is where you keep track of all your expenses, like used office furniture in Kansas City from Sante Fe Office Interiors, in order for you to take the home-office deduction. You’re able to write-off a percentage of your home for business. The regular option is much more complicated than the simplified option, so make sure you keep meticulous records.
With this option, you aren’t actually deducting expenses, you’re deducting the square footage of your space. You are allowed to write-off 300 square feet of space at five dollars per square foot. For example, if your office is 100 square feet, your deduction would be $500.
Once you choose your home-office deduction and file your taxes, you can’t change your mind. So, asking the advice of a tax expert is essential to getting the most money out of your deduction.
What Can I Claim on My Home-Office Deduction – Does Office Furniture in Kansas City Count?
It’s not a secret that creating a space for your home office requires a lot of time, focus, and supplies. Thankfully, you can write-off a lot of expenses on your taxes when you use a home-office deduction. Here’s a fast look at some items you can take as a deductible:
- Internet and Phone Bills – this includes second line
- Office Furniture – like used office chairs and desks
- Supplies and Materials – such as office paper
- Portion of insurance – because it protects the property you need for your business
- Potion of Utilities – these are indirect costs that are essential to your home office
Important: No one likes to be audited, but it happens! When you’re setting up your home office, it’s critical that you keep your receipts. That way, you can have enough evidence to take the home-office deduction with confidence.
So, What If I’m Not Eligible for a Home-Office Deduction?
Just because you can’t write your home-office deduction doesn’t mean you can’t save money and work productively. At Santa Fe Office Interiors, you kind find high-quality used office furniture in Kansas City that is functional and looks great in your home. We have organization and storage solutions, used office chairs and desks, and so much more.
Not only that, you can take your office furniture home with you, and don’t have to wait weeks for new furniture to become available. If you have questions about our inventory or how to outfit your home office with the right furniture, call Santa Fe Office Interiors at (913) 901-8800 or send us a message online. Our inventory is constantly changing, so make sure you take time to visit our showroom too!