When is Working from Home a Tax Deduction?

When is Working from Home a Tax Deduction?

The most recent changes to the tax laws stipulate that the home office deduction is no longer available for employees.

If you are self-employed or an independent contractor, you might qualify for the deduction if you can pass two tests:

  1. Regular and exclusive use: You must regularly use part of your home exclusively for your business.
  2. Principal place of your business: You must be able to show that you use your home as your principal place of business. If you have another location and you ALSO use your home to substantially and regularly conduct business, i.e. meet with clients, it may be deductible. If you have a separate free-standing structure that is used exclusively and regularly for your business, it does not need to be your principal place of business.

If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

Examples: You have an office where you meet your clients for appointments, but you also use your home office to do admin work. Use of your home office would be considered only “appropriate and helpful” and, as a result, not be tax deductible.

TL;DR: If you pass the two tests, you should take the deduction – though it is hard to pass the tests if you are renting another office space.