Home Office Deduction - Do I Qualify?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
is1971
Posts: 24
Joined: Mon Jan 24, 2011 10:23 pm

Home Office Deduction - Do I Qualify?

Post by is1971 » Mon Mar 12, 2018 7:52 pm

Hi,

Apologies in adavnce if this is off-topic. If it is, please feel free to remote it. Anyway, I’m slogging through my taxes and I’m wondering if I qualify for the home office deduction. I’ve always passed on it because even setting aside whether my situation qualifies or not, the paperwork and calculations always seemed unreasonably onerous for the reward. I just learned however, that there is now a simplified rule which allows you to simply deduct $5 per square foot up to 300 square feet. This makes the deduction much more tempting.

But do I qualify? The deduction is aimed primarily at people who run their businesses out of their homes and I don’t; I am a salaried employee. Based on what I’ve been able to find; even as an employee, the deduction is still a possibility, but only if I am working from home as a convenience for my employer and not as a convenience for myself. In other words, if I’m working from home, just because I like it, I don’t qualify, but if I’m working from home because my employer doesn’t have any space for me, I do. That seems straight forward, though I’m not sure how it applies to my situation. I am a 100% remote worker for a very large software company. They have plenty of space available for me, though the nearest office is 200 miles away. So, it’s not clear to me for whose convenience I am working from home.

I can’t imagine that my situation is very unique, but I haven’t had much luck tracking down an answer. Are there any CPAs on the board who might opine here? (I’m also open to wild ass guesses from truckers or plumbers or whatever).

User avatar
Rob5TCP
Posts: 3068
Joined: Tue Jun 05, 2007 7:34 pm
Location: New York, NY

Re: Home Office Deduction - Do I Qualify?

Post by Rob5TCP » Mon Mar 12, 2018 8:19 pm

Commuting is impossible - so this is the only option for you if you wish to work for this company (other than moving).
This is your principal place of your business and you use it for regular and exclusive business work.

IRS requirements

Requirements to Claim the Home Office Deduction

Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:

Regular and exclusive use.
Principal place of your business.

Regular and Exclusive Use.

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.

is1971
Posts: 24
Joined: Mon Jan 24, 2011 10:23 pm

Re: Home Office Deduction - Do I Qualify?

Post by is1971 » Mon Mar 12, 2018 8:35 pm

Rob5TCP wrote:
Mon Mar 12, 2018 8:19 pm
Commuting is impossible - so this is the only option for you if you wish to work for this company (other than moving).
This is your principal place of your business and you use it for regular and exclusive business work.

IRS requirements

Requirements to Claim the Home Office Deduction

Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:

Regular and exclusive use.
Principal place of your business.

Regular and Exclusive Use.

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.
Thanks Rob5TCP. I do have a large dedicated office so I think that I'm good and that was generally my interpretation of 'for the convenience of' as well though I always try to be conservative when it comes to these things :)

bnes
Posts: 391
Joined: Thu May 22, 2014 12:29 am
Contact:

Re: Home Office Deduction - Do I Qualify?

Post by bnes » Tue Mar 13, 2018 12:25 am

A deduction for employees is generally limited by the 2% rule (expenses must be greater than 2% of your AGI), as you have no Schedule C income to write off against. Anyway your home office is likely not for the "convenience of your employer", it's your lifestyle choice.

See
https://www.hrblock.com/tax-center/fili ... deduction/
https://ttlc.intuit.com/questions/39437 ... yed-status
Quite frankly the IRS leaves "convenience of your employer" rather vague. As you probably know, the IRS words on the topic are at https://www.irs.gov/publications/p587

If you want to do millions a great service, write up your situation, seek then publish a private letter ruling:
https://www.irs.gov/tax-exempt-bonds/te ... c-concepts
Last edited by bnes on Tue Mar 13, 2018 12:32 am, edited 1 time in total.

bnes
Posts: 391
Joined: Thu May 22, 2014 12:29 am
Contact:

Re: Home Office Deduction - Do I Qualify?

Post by bnes » Tue Mar 13, 2018 12:32 am

Here's some analysis:
https://www.journalofaccountancy.com/is ... 37228.html
However, in the absence of a specific requirement by their employer that they work at home, when the “convenience of the employer” requirement is litigated, taxpayers in the past have usually lost. Taxpayers with the right facts and circumstances can win, though, as happened in Drucker, 715 F.2d 67 (2d Cir. 1983)....

pshonore
Posts: 6332
Joined: Sun Jun 28, 2009 2:21 pm

Re: Home Office Deduction - Do I Qualify?

Post by pshonore » Tue Mar 13, 2018 8:47 am

In any case, tax year 2017 is the last year this is available for employees. No misc Sched A deductions starting in 2018

is1971
Posts: 24
Joined: Mon Jan 24, 2011 10:23 pm

Re: Home Office Deduction - Do I Qualify?

Post by is1971 » Tue Mar 13, 2018 10:45 am

bnes wrote:
Tue Mar 13, 2018 12:25 am
A deduction for employees is generally limited by the 2% rule (expenses must be greater than 2% of your AGI), as you have no Schedule C income to write off against. Anyway your home office is likely not for the "convenience of your employer", it's your lifestyle choice.

See
https://www.hrblock.com/tax-center/fili ... deduction/
https://ttlc.intuit.com/questions/39437 ... yed-status
Quite frankly the IRS leaves "convenience of your employer" rather vague. As you probably know, the IRS words on the topic are at https://www.irs.gov/publications/p587

If you want to do millions a great service, write up your situation, seek then publish a private letter ruling:
https://www.irs.gov/tax-exempt-bonds/te ... c-concepts
Thanks for these links. It's strange to me how differently different sites characterize the 'at the convenience of' requirement. In any event, as I learned last night and as you point out here, the 2% rule makes it a moot point.

Thanks again.

Post Reply