In the pandemic, more people worked from home than usual, and some of those people qualify to claim the home office deduction. This allows taxpayers to deduct certain home expenses on their tax returns when they file their 2021 tax returns next year.
There are some requirements that a taxpayer needs to meet in order to qualify for the home office deduction. First, this deduction is for small business owners only, not employees. This deduction applies to both homeowners and renters who can only deduct from certain expenses such as mortgage interest, insurance, utilities, repairs, and more. In order to claim home expenses as a deduction, they need to meet certain requirements and the deductible amount may be limited.
There are two basic requirements a taxpayer’s home needs to meet in order to qualify for a deduction. The first is that there must be exclusive use of a portion of the home for conducting business on a regular basis. The second is that the home must be the taxpayer’s principal place of business. They can also meet this requirement if administrative or management activities are conducted at home and there is no other location to perform these duties.
Taxpayers who do qualify may choose one of two methods to calculate their home office expense deduction. There is the simplified method which is a rate of five dollars per square foot for the business use of the home which is limited to a maximum size of 300 square feet and a maximum deduction of $1,500. The regular method calculates the deduction for a home office based on the percentage of the home devoted to business use.