November 25, 2020

This unprecedented era of working from home has led to many questions about home office expenses and their tax implications.

26% of Americans have said they’re working “entirely” from home, while 8% are “mostly” working remotely.  If you are a part of this group, you may be wondering if expenses relating to your home office are tax-deductible.  The answer is yes, but it’s not exactly a black-and-white issue.  So, let our tax professionals explain to you what would constitute a valid write-off for home office expenses.

According to the IRS, home office expenses may only be deducted when a “specific area of your home” is used “regularly and exclusively as your principal place of business.”  The exception to this is if you use the space to physically (not virtually) meet with patients, clients and customers.  These meetings would have to take place on a consistent and regular basis and be “substantial and integral” to conducting your business. 

Defining your home office as your “principal place of business” doesn’t have to be overly complicated.  It does not have to be an entirely separate room in your house, but rather must be a dedicated space where only business activities take place.  If you watch TV or pay personal bills in that space, it can no longer be defined as your principal place of business.  Although this is not required, our accounting experts recommend setting up furniture or marking this space to avoid unnecessary confusion at tax time.

Whether you’re working from home permanently or just part of the time, Frank W. Kapitza & Associates will help you appropriately deduct your home office expenses and minimize your tax burden.  Contact us today at 973-276-0650 to speak to our tax team!