One of the hardest parts of becoming an independent contractor and a remote worker was developing my own schedule. Who doesn’t like complaining about the cost of gasoline or the annoyance of multi-hour, daily commutes?
That reality is built into the cost of being an American employee.
However, even though the pandemic is not over, we are definitely living in a post-pandemic world. Before 2020, the concept of a remote worker was not unknown, but it was still extremely fringe.
Now remote work, or a hybrid of remote and traditional office work, is the norm for most businesses.
I have been a remote worker since the mid-2000s, and people thought it was strange. Back then I was an occasional side gig remote worker, but now I am full-time.
It’s no secret that remote workers are solely responsible for their taxes. What I was shocked to learn is that there are numerous home office-based deductions available for full-time remote workers and part-time side-gig workers.
If you are a full-time remote worker or even an occasional side gig worker, you may be leaving a lot of money on the table via unused tax deductions. If you work from home exclusively, you may be entitled to a lot of tax deductions.
Just keep in mind that the tax laws in your state may vary. And you need to keep every receipt related to your work to qualify. But when in doubt, consult your tax professional.
Here is what you need to know.
Qualifications
You can only claim home office tax deductions as a renter or homeowner. If you are using a garage, studio, houseboat, trailer home, or barn as an office space, you could claim those too. You can’t claim such credits if you live in a hotel or are a houseguest
You must have exclusively designated spaces or rooms in your house for your work. And your home does not need to be the exclusive place you do business, but it must be the primary and main place of your business.
Deduction Methods
The home office deduction methods for determining your claims won’t be easy. So, talk to a tax professional.
The I.R.S. has two deduction options. With the simplified option, the square footage of your home office space is then multiplied by the current prescribed rate. Currently, the prescribed rate is a deduction of $5 per square foot to a maximum of 300 square feet.
The standard deduction method calculates your residential expense against your living expenses. In other words, if you can prove that you use 15% of your home as an office space, then you should be able to deduct the equivalent cost of rent, mortgage payments, some utilities like electric bills, meals, and even some insurance payments from your tax bill.
However, you need to have exacting records and receipts in these situations. And be prepared to be audited.
The Benefits
You can deduct a variety of expenses from your home office as long as they are related to your business, and you have accompanying receipts and documentation.
You could deduct home office-related business expenses like:
- Vehicle-related expenses like fuel and repairs
- Meals
- Internet bills
- Laptop, computers, scanners, smart devices, and all electronic related business use
- Social media and internet-related advertising costs
- Pension and retirement funds
- Rent
- Any education, certification, and skill enhancement courses related to your business
Consult your tax specialist to learn what home office-based deductions can apply to you.
Don’t make such tax deduction calculations on your own unless you have the experience and certifications to do so.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.