March 29, 2021

Can You Claim Home Office Deductions?

Find out if you qualify for home office tax deductions

You are self-employed

You only qualify for home office deductions if you are an employer, business owner, or independent contractor. If you are an employee working from home, you unfortunately do not qualify for these tax breaks. However, depending on your state, you might be able to claim some tax deductions for your state filing.

Your home meets the “exclusive and regular use” requirements

Your home can qualify for tax deductions if a portion of your house is used for your business on a regular and exclusive basis. Whether it is an apartment, condominium, or houseboat, as long as it is used exclusively for business and not shared for a different purpose, you can qualify for tax deductions. This also applies to structures on your property, such as an unattached studio, barn, greenhouse, or garage. This does not include any part of a taxpayer’s property like a hotel, motel, or other business.

Your home is your principal place of business

If you use your residence as the principal place of business or as a place you regularly meet with clients and customers, you may qualify for home office deductions. It does not have to be the only place you meet customers, but if you utilize the space for administration or management activities, you might be able to claim the deductions.

Your home is used to provide daycare services

If you provide daycare services in your home for children, older adults, or individuals with disabilities, you are exempt from the “exclusive-use” requirement. You can use other parts of the house for personal activities and still qualify for home office tax deductions. Nevertheless, to claim that tax break, your home care business must meet any applicable state and local licensing requirements.

Your home is used as storage for your business

You are also exempt from the “exclusive-use” requirement if you allocated a space in your residence for regularly storing inventory or product for your business. If you use part of your principal place of business for storage, exclusive use of space is not required, but regular use of space is still required. That space qualifies for tax deduction if that is the sole fixed location of the business.

As a self-employed individual, federal income tax home office deductions can be a major tax-saver. The biggest obstacle is to meet the “exclusive and regular-use” requirements throughout the entire year. If you are unsure on how to move forward with claiming these tax deductions, consult a tax advisor or use a tax online software.