The Tax Deduction for a Home Office & Telecommuting

As more and more business is conducted online, employers are discovering that they don't need their workers to come to the office. As a consequence, telecommuting has become a popular form of employment. The IRS allows you to deduct certain expenses from your taxable income if you maintain a home office.

Restrictions

To take the home office deduction, your office must be used exclusively for work, and you must use it on a regular basis. Although the rules and restrictions are complex, the home office must typically be the place where you spend most of your work time and perform your most important work activities. You must be working at home for your employer's convenience, not your own, and you cannot take the deduction if your employer compensates in any way you for using it.

Partially Deductible Expenses

You may deduct a portion of your home's expenses equal to the proportion of your home that is used for your home office. For example, if you use 10 percent of the total square footage of your home as a home office, you may deduct 10 percent of your insurance, utilities, mortgage interest, depreciation and general repairs. You cannot deduct expenses that apply solely to another part of your home, such as lawn care or repair to a light fixture in another room.

Fully Deductible Expenses

You can deduct 100 percent of expenses that you incur solely because you maintain a home office, such as a dedicated phone line or a fax machine. You may also deduct expenses that are not directly business-related if they apply only to your home office -- expenses for painting your office, for example. You can't deduct any amounts reimbursed by your employer.

Claiming the Deduction

You claim the home office deduction as an itemized deduction, meaning that you can't use it together with the standard deduction. You can only deduct the portion of your total business expenses, including business expenses unrelated to your home office, that exceed two percent of your adjusted gross income. As a telecommuting employee, you must complete Form 2106, Employee Business Expenses, along with Form 1040 and Schedule A.

Photo Credits

  • Home Office image by Kathy Burns-Millyard from Fotolia.com

About the Author

David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.

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