Have you switched from renting office space to working from home to run your small business?
Freelancers, entrepreneurs and other self-employed people affected by the COVID pandemic may now qualify for the home office deduction. If you use part of your home solely for business-related activity, you can write off certain expenses as long they meet the IRS' requirements.
Check the IRS requirements for working from home
As a service to our readers, we want to bring the IRS Rules to your attention as there are many nuances to the qualification rules. For instance, just because you work from home, it doesn't mean you qualify. Employees are exempt from the deduction.
A few other highlights:
- You don't have to own your home to take the deduction. You can be a renter and qualify. The definition of a home is broad, but if makes sense to double-check.
- You have to use a part of your home regularly and exclusively (read these qualifications carefully) and your home must be the principal place of business.
- There are two methods to calculate your deduction: simplified and regular. Learn the difference to see which is best for you.
Keep good records and know the tax code details
Like we said, the rules for qualification can be tricky, so make sure you read the details for carefully. Claiming the home office deduction can be an IRS audit red flag as many people try to take this deduction without solid records of expenses or a qualifying situation. Be sure to talk with your accountant if you need more direction. You can also ask your fiduciary financial advisor for more information.
If you run your business from home, please read this information published by the IRS. If you're not yet working from home but are considering working to earn extra income during retirement, be sure to keep this possible deduction in mind. The expense saving of launching your self-employed adventure from home could be the extra push you need to try it out!
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