Technology has made it easier to work from home so lots of people now commute each morning to an office down the hall. However, just because you have a home office space doesn’t mean you can deduct expenses associated with it. In order to be deductible for 2019 and 2020, you must be self-employed and the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with the space. There are two options if you qualify: Write off a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space. This requires calculating, allocating and substantiating actual expenses. Or you can take the “safe harbor” deduction. Only one simple calculation is necessary: $5 times the number of square feet of the office space. The safe harbor deduction is capped at $1,500 per year, based on a maximum of 300 square feet.
To qualify under prior law, a home office had to be used for the “convenience” of your employer. Unfortunately, the TCJA suspends the deduction for miscellaneous expenses through 2025. Without further action from Congress, employees won’t be able to benefit from this tax break for a while. However, deductions are still often available to self-employed taxpayers.