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Should you labored remotely in 2024, chances are you’ll be eyeing the home office deduction. Nonetheless, qualifying for the tax break could also be tougher than you anticipate, consultants say.
Solely 7% of corporations allowed fully remote work in 2024, down from 21% in 2023, in accordance with a ZipRecruiter survey that polled 2,000 employers in September and October. However 40% of corporations assist hybrid work preparations, the survey discovered.
Nonetheless, should you’re a W-2 employee — which means your organization withholds taxes out of your paycheck — you’ll be able to’t declare a tax break for 2024 house workplace bills, in accordance with licensed monetary planner Malcolm Ethridge, founder and managing companion at Capital Space Planning Group.
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Earlier than 2018, W-2 staff may declare sure unreimbursed work-related prices, together with house workplace bills, through “miscellaneous itemized deductions.” However that tax break was eradicated by 2025 through President Donald Trump‘s 2017 tax cuts.
For 2024, you might nonetheless be eligible for the house workplace tax deduction with contract or self-employed work, whether or not you lease or personal your own home, stated Ethridge, who can be an enrolled agent.
To qualify, it’s essential to have a dedicated space used “commonly and completely” for enterprise, in accordance with the IRS. The house may very well be a part of your own home, akin to a separate room, or one other construction on the property.
How one can calculate the house workplace deduction
There are two methods to calculate the home office deduction: the “common methodology” and the “simplified possibility,” in accordance with the IRS.
The “simplified possibility” is a flat price of $5 per sq. foot of the a part of the house used, as much as 300 sq. toes, for a most of $1,500.
In contrast, the “common methodology” deducts precise bills based mostly on the proportion of your own home used, akin to a part of your mortgage curiosity, insurance coverage, utilities and repairs. This might additionally embody depreciation, which subtracts a portion of your own home’s worth over time.
Whereas it is extra sophisticated, the common methodology can result in “fairly substantial financial savings” in some instances, stated CFP Neil Krishnaswamy, president of Krishna Wealth Planning in McKinney, Texas.
Nonetheless, should you use the common methodology, you might face “depreciation recapture” whenever you later promote your own home for a revenue, Ethridge stated. This could set off taxes on the depreciation beforehand claimed or that would have been claimed, which is usually a “nightmare,” he stated.
No matter whether or not you employ the simplified possibility or the common methodology, record-keeping is necessary, consultants say. In any other case, the deduction may very well be disallowed following an IRS audit.
