The Home Office Deduction in Times of COVID

I discussed the availability and requirements of the home office deduction in a previous newsletter.

The Internal Revenue Service wants those individuals who qualify, to consider taking the home office deduction. The deduction would result in a reduction to the taxpayer’s tax liability.

As a result of COVID many people began working from home in early 2020 and quite a few are still at home. The question is whether these individuals may claim a home office deduction on their 2020 tax return. Most people who ask this question will be surprised to learn that the answer is that they are not entitled to claim a home office deduction.

The home office deduction is available to a taxpayer whose principal place of business is located in their home. Additionally, the home office must be used regularly and exclusively for the business. In order to be carrying on a business, and qualify for the deduction, the taxpayer must be self-employed, an independent contractor or working in the gig economy.

Many of the taxpayers working from home due to COVID are employees. Employees who receive a W-2 from an employer are not eligible for the deduction even if they are working from home. Employees are not involved in carrying on a trade or business. Employee business expenses, such as a home office, were an itemized deduction. However, the employee business expense deduction as an itemized deduction was suspended for years 2018 to 2025 by the Tax Cuts and Jobs Act.

Related Posts