Can you Claim the Home Office Deduction on your 2020 Tax Return?
The pandemic is nearing its first year, and millions of Americans have long been severely affected since then. Thousands already succumbed to the dreadful virus, and others, while they may be uninfected, are struggling towards their financial health.
COVID – 19 has forced the workforce population to work from home, making them the luckiest except for all the household factors that may cause stress. On the other hand, many people were laid off by their employers. To be unemployed in the middle of a great pandemic is extremely hard, and these people seek unemployment benefits for survival.
People applying for federal tax returns have various tax deductions available for them, including the home office tax deduction. Below we will discuss the home office deduction and whether you can claim them on your 2020 tax return.
Home Office Deduction
This specific deduction is only for self-employed people. You can use this tax deduction if you pass all the requirements needed. The Home office deduction covers all expenses for using your home as your workplace. Costs include utilities, rent, repairs, mortgage interest, depreciation, and repairs. It also covers printers, office supplies, postage, computers, and other relevant stuff needed for the office’s functionality. The home office tax deduction is not specific to your homestyle, as long as you are working from it. Types of home offices may also include a separate unit on your property like a greenhouse, studio, barn, or unattached garage.
What is the Scope of the Home Office Deduction?
If deemed eligible, expenses such as utilities, repairs, and rent can be deducted. For homeowners insurance, depreciation, property tax, and mortgage interest can be deducted.
However, there are two types of expenses: indirect and direct. Indirect home office expenses are only partially deductible. It includes all costs relating to the home where the office is situated. On the other hand, direct home office expenses are fully deductible. It consists of all expenses relating to the literal working area like paint and repairs.
Lastly, the deduction is limited to your business’ annual profit, he said. While you can’t take the home office deduction if your company operates at a loss, you may be able to carry forward your expenses and take the deduction in the future.
