Month: September 2021

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.

The Illinois Department of Revenue will not assses penalty for late estimated payments due for tax years ending before December 31, 2022. This is due to the elcection to pay the entity-level tax under Public Act 102-0658. The Illinois Department of Revenue reccomends people make estimated payments to reduce the tax payment due when the return is filed.

Public Act 102-0658, which was created August 27, 2021, created an entity-level tax for partnerships and subchapter S Corporations allowing partners and shareholders to work around the federal cap on the deduction for state and local taxes effective for tax years ending on or after December 31, 2021. When a partnership or S Corps makes the election to pay the entity-level tax, it’s required to make quarterly estimated payments if the tax due is expected to be $500 or greater, or you could incur late payment penalties for the underpayment of estimated taxes per Illinois Income Tax Act Section 804.

For most taxpayers, two estimated payment deadlines have passsed already and the third quarter estimated payment for calender-year filers is due by September 15, 2021. Partners and shareholders of pass-through entitites should continue making all required quarterly installmments even if they expect the pass-through entity to pay an entity-level tax.