Tailored tax advice: understanding the home office deduction

Understanding how to calculate the home office deduction will ensure you maximize your clients’ tax savings while remaining compliant with IRS rules. Accurate calculations help avoid audits and penalties, providing your clients peace of mind and financial benefits.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Basically, W-2 employees cannot use the home office deduction, correct?

A: Correct. Form 2106, Employee Business Expenses, is not allowed at this time for employee business expenses. The unreimbursed employee business expenses were suspended as a result of the Tax Cuts and Jobs Act.

Q: Does the personal use of the closet space disqualify the business use of home?

A: No, the closet space just doesn't count as part of the office space.

Q: Can self-employed people who pay rent deduct it as part of the home office?

A: Yes, they can deduct a portion of their rent instead of mortgage and taxes.

Q: Is the home office deduction limited to profit no matter which method is used, actual or simplified?

A: Yes. Regardless of the method used (simplified or regular), the home office deduction for any year is capped at the amount of business income. However, if the regular method is used, the taxpayer can carry over the amount they cannot use to subsequent tax years.