The concept of a home office is now both widespread and commonplace, thanks mainly to the exponential rise in communication technology and the pandemic. But this practice of working from home and using a part of the home as the office is by no means a new one, simply because of its convenience. Not having to leave home to go to work or conduct one’s business is a convenience many have enjoyed over time. Here is a brief discussion of the criteria one must adhere to if one claims tax deductions for home office use.
Home-related expenses such as mortgage interest, utilities, property taxes, or depreciation cannot be deducted as business expenses. However, some expenses may be deducted for using a part of your home when specific criteria are met. Some of these essential criteria include regular and exclusive use of a part of your home as your principal place of business or regular and complete use of a part of your home as a place where you meet customers, clients, patients, etc. Note that the criteria specifically state “exclusive” and “regular.” Once you have qualified for these deductions, the next stage is calculating the amounts that can be deducted. Here the option of going with actual or opting for the simplified calculation method is available to you.
If a simplified total amount depending on the number of square feet of space used is not your choice, you can opt for the calculation of your actual expenses. For example, the painting, maintenance, and repairs carried out for only the home office part of your home can be deducted in full. The primary telephone line coming into your home is a personal expense. However, long-distance business-related calls placed using this line can be deducted. So can a second or third telephone line be used exclusively for business purposes? Expenses like utilities, trash removal, or cleaning services can be deducted if they are used only for the business part of your home. It must also be mentioned that if your income from the business use of your home equals or exceeds the expenses calculated at actuals, then you can claim a full deduction, but if the income is less than the expenses incurred, then deductions related to specific components can be limited.