Understanding how to calculate the home office deduction will ensure you maximize your clients’ tax savings while remaining compliant with IRS rules. Accurate calculations help avoid audits and penalties, providing your clients peace of mind and financial benefits.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Basically, W-2 employees cannot use the home office deduction, correct?
A: Correct. Form 2106, Employee Business Expenses, is not allowed at this time for employee business expenses. The unreimbursed employee business expenses were suspended as a result of the Tax Cuts and Jobs Act.
Q: Does the personal use of the closet space disqualify the business use of home?
A: No, the closet space just doesn’t count as part of the office space.
Q: Can self-employed people who pay rent deduct it as part of the home office?
A: Yes, they can deduct a portion of their rent instead of mortgage and taxes.
Q: Is the home office deduction limited to profit no matter which method is used, actual or simplified?
A: Yes. Regardless of the method used (simplified or regular), the home office deduction for any year is capped at the amount of business income. However, if the regular method is used, the taxpayer can carry over the amount they cannot use to subsequent tax years.
To learn more about calculating the home office deduction, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.