Because of the COVID-19 pandemic, the number of people working from home exploded in 2021. Some people will be able to deduct their home office expenses, but the main query remains as, Is home office furniture tax deductible? The home office deduction for those who work for a company was repealed by law in 2018. So, what is the current tax rate? Is the tax rate too high?
Only self-employed individuals are eligible for the home office deduction at this time. If you’re an employee, they’re not eligible, even if you’ve been working remotely and have to set up a home office.
In this article, we will talk about tax eligibility and relevant matters. Also, don’t forget to check out our expert’s advice to know what you’ve wanted these days!
Who Can Have the Opportunity of the Home Office Deduction?
If your home office qualifies, you can deduct your home office expenses from your business revenue. People who work from home full-time, as well as those who have a freelance side gig. Even if they also work for an employer – and those who were self-employed for only a few months – are all included.
In previous years, anyone could deduct some home office expenses from his taxes if he worked for another company. Or even worked from home. However, if you are an employee, the Tax Cuts and Jobs Act stipulates that you will not be able to deduct home office expenditures from 2018 through 2025.
This was a regrettable change that occurred in the run-up to the 2020 pandemic, forcing millions of people to work from home. The good news is that the rules for self-employed workers and independent contractors have remained unchanged. If you are self-employed, you can continue to deduct eligible expenses, such as home office furniture.
Items for the Home Office
When it comes to deducting office furniture from your taxes at the end of the year, there are some guidelines to follow. The IRS demands that your home office be your primary business location and that you use it on a regular and exclusive basis.
Now if you are determined to furnish a home office, you may have a number of furniture requirements. Consider the following:
- Coffee Table
Whether or not you can deduct your office equipment from your taxes, you shouldn’t have to work from home. For optimal posture, you should choose an ergonomically built chair. Because many of us spend less time being active, maintaining proper posture while sitting is critical. Consider using a standing desk if you find yourself sitting too much!
Is Your Home Office Eligible for a Tax Credit?
To be eligible, your home office must also meet specific criteria. You must utilize a portion of your house “regularly and solely” for business to qualify for the home office deduction. Your office doesn’t have to be in a separate room- it just needs to be in a part of your house where you don’t do anything else.
It may be a designated area in the corner of your basement, but it can’t be the kitchen table where your entire family eats. The facility must also be your primary place of business or a location where you meet with clients or patients on a regular basis. It doesn’t have to be your only place of business — it could just be where you execute your administrative tasks!
How Do You Work Out Your Deduction for a Home Office?
The deduction can be taken in one of two ways. Although the simplified alternative is simpler, it may result in a reduced tax benefit. The standard approach necessitates more computations and paperwork, but it may result in a greater deduction.
Standard Option: You deduct your real expenses with this option. Some of your home office expenses, such as the cost of painting or making repairs to that specific room- are 100% deductible. Based on the amount of your home that you use as a home office, you can additionally deduct a portion of your overall housing expenses.
You can deduct 10% of the cost of your mortgage interest or rent, utilities, and homeowners insurance if your home office is one-tenth of the square footage of your home.
Simplified Option: In 2013, the IRS provided a new simplified option for deducting home office expenses. You can deduct $5 per square foot of your home office, up to 300 square feet. But that’d be preferable only for a maximum deduction of $1,500, rather than keeping track of all your expenses.
You may take advantage of this tax savings without needing to keep track of specific expenses as long as your home office qualifies. You can prorate the amount based on the number of months you worked from home if you take the simple deduction of $5 per square foot. For instance, if you worked from home for five months and your home office was 300 square feet, you can deduct $625.
How can you Approach the Deduction?
The deduction is taken straight on Schedule C, which reports your company income and costs- if you utilize the simplified method. You must include Form 8829 with your income tax return if you use the regular procedure. Then, on Schedule C, declare the total deduction from your business income.
If your home office expenses exceed your business income for the year, your deduction may be limited. If there are any unused business uses of home costs at the end of the year, they will be carried forward to the following year if the normal method is employed. The carryover is not allowed if the simplified technique is utilized.
Even after the COVID-19 pandemic’s quarantine phase has ended, many people have decided to work from home. But Tax payment has become a major issue regarding that note. We have discussed all the possible ways to help you understand this matter. If you are still confused, don’t hesitate to share!