Think twice about taking a home office deduction

On Behalf of | Mar 24, 2022 | Tax Audits

For more than two years, much of the United States workforce has adapted to a remote or hybrid work environment. With many employees fully adopting the work from home strategy, the upcoming tax return might become unnecessarily complex.

While there are deductions available for those working from home, the eligibility requirements might not be as straightforward as taxpayers might think.

Who is eligible for the deduction?

While many full-time W-2 employees might consider themselves to be permanent remote or work from home employees, this designation does not automatically qualify them for the deduction. In general, only three types of workers meet the IRS requirements for the deduction:

  • Self-employed
  • Independent contractor
  • “Gig economy” worker

Even if the worker meets these qualifications, there are eligibility requirements based on the office space itself. For example, the home office must be the primary work area. Renting additional space or maintaining a rotation of locations does not count toward eligibility. Additionally, the space must be dedicated to working. The common example is someone who fires up a laptop to complete design work or content creation while sitting at the dining room table – an area that is also used for meals and family gatherings.

It seems the global pandemic has changed the way most businesses operate in the foreseeable future, and perhaps forever. While the IRS could adjust their definitions and allowances for “home office” and “work from home” to expand eligibility to a larger base, it is wise to fully understand the rules and restrictions for the current tax year’s data. With any questions, it is wise to discuss your unique situation with an experienced tax law professional. Filing a return with incorrect deductions could be a red flag for the IRS and might ultimately result in a tax audit.