Work from home? How to deduct on tax returns
(NEXSTAR) — Now that you’re working from home, you might be wondering what home office deductions you can legally claim on your 2022 tax returns.
Well, we have bad news: most employees working remotely during the pandemic are entitled to next to nothing.
“There are a lot of misunderstandings, myths and bad advice from Uncle Bob on the internet. [concerning] home offices,” says Mark Steber, director of tax information at Jackson Hewitt and a tax practitioner with more than 35 years of experience. “At the end of the day, if you’re an employee, you generally don’t qualify for home office deductions.”
In other words, your “home office” will not qualify you for any tax relief unless you are self-employed or running your own business.
But if you actually run a business from your home, or were self-employed in the last fiscal year, “the sky’s the limit” if you have the documentation to back it up, according to Steber. For these taxpayers, direct and indirect expenses are deductible to the extent that they relate to your business. For example, the IRS states that repairs to your home office (a direct expense) are fully deductible, while items such as insurance and utilities (indirect expenses) are deductible based on the percentage of your home. devoted to business.
But what if you’re an employee and also run a side business from your home office?
“Then you fall into the right category again,” says Steber. “There are people who do business on Amazon, Etsy…they don’t run a full-time business like you [usually] think about it, but it’s a business.
If, unfortunately, your work-from-home situation prevents you from getting the deductions you were hoping to get, Steber says taxpayers may be eligible for other tax credits simply because of major life changes during the pandemic.
“There have been a lot more life changes over the past few years,” Steber says. For example, some people may have lost their job, gone back to college, or welcomed a new baby, which could make them eligible for additional credits.
That said, Steber says it’s important for taxpayers to educate themselves on tax codes — or hire a professional — to make sure they get the refunds they’re entitled to.
“If you shorten the process…you’ll end up leaving money on the table that won’t be easily recovered,” he told Nexstar.
Do you always feel like you have a right to something? Even despite your status as a homeworker? In this case, you are free to fill out a Form 8829 and send it to the IRS. Stuber, however, offers a word of warning.
“You can try to put home office deductions into it,” he says, “but you’ll get caught pretty quickly.”
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