Millions of people around the country are working from home because of the coronavirus pandemic. Many have converted dining, family, and spare rooms into workspaces, but can you get a tax break for having a home office?
"You either have to be an employee or you have to have your own company," said Enrolled Agent Rod Couts. "So long as you have a place that you use regularly and exclusively for business, you shouldn't have a problem."
Couts says it gets a little more complicated when you start looking at how to claim the deduction. Many people can only claim it on their state tax return.
"If you're a W-2 employee, you're no longer allowed to write off that home office through 2025 on the federal return," said Couts. "You could write it off on the state return."
If you do want to claim the deduction on your state return, Couts says you should ask your employer for a note saying you are not allowed to come into the office.
"If your employer requires you to work from home, then it does qualify for a home office deduction," said Couts. "If you're just doing it as a personal choice, then you don't."
You will also need to itemize your tax return in order to claim the deduction, which only 30 percent of taxpayers do.
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"The first thing I'd say to someone is 'Go look; did you itemize on your last tax return?'" said Couts.
The home office deduction allows you to write off a portion of expenses as business-related. That could include parts of your mortgage interest, property taxes, rent, insurance and utilities. The amount of the deduction is based off the square footage of your office space. You can calculate how much you pay for each square foot of your workspace, or use the standard IRS estimate.
"The IRS gives you $5 per square foot, and that's a pretty good measure to keep you from having to keep all the records," said Couts. "If you do the math, they're really not that much different, and the IRS can't argue with you if you take the $5 per square foot."
Even if you don't have a separate room to use as an office, you still might be able to claim the deduction. Couts says all you need is a space you regularly use only for work.
"Regularly means more than just once every now and then," said Couts. "Exclusive is what it is. You shouldn't be doing any personal business there."
That means you do not have to spend your entire workday there, but you cannot use that workspace for other projects. These qualifications mean many people may not qualify for the deduction, even though they are required to work from home. If you do want to try and claim the deduction, Couts says you should reach out to a tax professional.
"I think most people will be disappointed to find out they don't qualify," said Couts.
