work from home

Does Your Home Office Qualify for Tax Deduction?

In order to qualify for a home office deduction, there are at least four things you have to prove.

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As more people are now working from home, setting up workspaces on the dining room table, or the spare room where Grandma normally sleeps when she visits, many are wondering if these new "offices" qualify for a tax deduction.

"The deduction qualifications are generally tough to meet," said Pamela Marshall, a certified financial planner in Studio City. "It has to be a place that is only used for business. If you're using your dining room table to work at by day and eat at by night, you're not going to meet that exclusivity test."

In order to qualify for a home office deduction, Marshall says there are at least four things you have to prove:

  • You use part of your home exclusively and regularly for work.
  • You conduct the majority of business from your home office.
  • Prove the space is for the convenience of your employer.
  • You are not reimbursed by your employer for any of the expenses.

"When you take a deduction for your home, usually that amount that you're capturing in the deduction ends up being a depreciated amount against the value of your home," Marshall said. "So if you’re going to do this, chances are you're going to need to keep these records forever, until you ultimately sell your home and you're going to have to use this depreciated amount to offset your cost basis."

In short, you may end up paying for the deduction in the long run.

"My recommendation, if you're an employee that's now working from home, you want to keep your receipts for any business supplies you purchase," Marshall said. "You want to keep records for any increased costs such as additional internet capacity or additional minutes on your phone plan and if you think that it’s tallied up to a sufficient amount you can talk to your employer about possibly getting a reimbursement."

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