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If you’re among the millions of Americans who will have worked remotely — in whole or in part — in 2022, you might be wondering about the home office tax deduction.
While remote work has declined since the pandemic’s early days, nearly 30% of employees were working remotely as of January, according to LinkedIn’s Workforce Confidence Index.
However, many of these workers cannot claim the home office deduction, said Brad Sprong, national tax director for KPMG Private Enterprise.
Evaluate the IRS guidelines for your work area
Your workplace must meet certain IRS guidelines to qualify for the deduction, said Rob Burnette, CEO of the Outlook Financial Center.
Based on the square footage of a given area in your home, you must use your “home office” solely for work, he said. And the IRS expects it to be the primary location for your business and used regularly.
“It doesn’t have to be a room with four walls around it,” Sprong said, noting that it could be a designated 200-square-foot area in your home. But “it would be hard to argue that your kitchen table is strictly for business,” he added.
Calculate the home office deduction
There are two ways of calculating the home office deduction: the “simplified variant” and the “regular method” according to the IRS.
The simplified option uses a standard deduction of $5 per square foot of the commercial portion of your home, capped at 300 square feet or $1,500.
The regular method, which is more complicated, uses the percentage of your home that is used for business, including actual expenses such as: B. a portion of your mortgage interest, insurance, utilities, repairs and depreciation. The calculation is made on form 8829.
“The simplified method is my preferred method because most people don’t have the records or enough prints to make the regular method work,” Burnette said. He usually calculates it both ways for new customers to see which option offers the bigger tax break.
Of course, some taxpayers can get a bigger tax break by using the regular method. “While it’s more cumbersome, it’s a lot more beneficial since the simplified option is capped at $1,500,” Sprong said.
But if you’re using the regular method, it’s important to have documentation to support your deductions. “If you’re drawn to the audit, that’s a focus area for the IRS,” he warned.
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