OFFICE IN HOME
Everyone is asking about this since they’re required to work from home due to the Covid pandemic.
For federal tax purposes you can only deduct office in home if you are a business. In Pennsylvania you can deduct Home Office expense if your employer requires you to work from home. If your employer is requiring you to work from home because of Covid-19 you still cannot claim Home Office on your federal tax return. You can claim Home Office on your Pennsylvania tax return.
If you Operate your business from your home the space must be used exclusively for business to be deductible. There are two methods to take Home Office expenses. One method is the actual expenses, and the other is the simplified square foot method. Either method you will need to know the square footage of your house and the square footage of the office space.
Pennsylvania only allows for the actual expenses Of Home Office for a business or for an employee required to work from home. If you are claiming Home Office and will be claiming a portion of your utilities as office expense you will need to file use tax On the proportion of utilities in your Home Office in Pennsylvania.
Generally speaking, to qualify for the home office deduction,
- Exclusive and regular use: You must use a portion of your home exclusively and regularly for your business.
- Principal place of business: Your home office must be either the principal location of that business, or a place where you regularly meet with customers or clients.
- Exceptions: Some exceptions to these rules, such as for daycare and storage facilities.
Legitimate business expenses
Any expenses you deduct must be directly related to your business. Typical allowable expenses are similar to those allowed for office-based businesses. Common deductions include:
- Repairs and maintenance
- Home depreciation
- Deductible mortgage interest
Simplified square footage method:
Beginning with 2013 tax returns, the IRS began offering a simplified option for claiming the deduction. This new method uses a prescribed rate multiplied by the allowable square footage used in the home.
- For 2020, the prescribed rate is $5 per square foot with a maximum of 300 square feet.
- If the office measures 150 square feet, for example, then the deduction would be $750 (150 x $5).
- The space must still be dedicated to the business activity as described above.
NOTE: With either method, the qualification for the home office deduction is determined each year. So you might qualify one year and not the next, or vice versa.