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Home Office Deductions for Tax Year 2022

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In 2020, we shared the latest home office deductions information in regard to the shift to remote work caused by the pandemic. Two years later, we wanted to share an update to help you prepare for your 2022 taxes.  What has Changed Since 2020? Who qualifies for a home office deduction has not changed. Only self-employed individuals who work from a home office can take advantage of this deduction. How the deduction is calculated has been the same since 2013.  While this deduction hasn’t changed, it bears repeating how to take advantage of this deduction.  How to Calculate the Home Office Deduction According to the IRS, you have two options to calculate the deduction: the regular method and the simplified method. The Regular Method Using the regular method, you calculate the deduction by determining the percentage of the space that is dedicated solely to business use.  Direct business expenses are fully deductible. This includes updates made only to your home office, such as: Painting  Installing flooring Making repairs  Furniture Fixtures Indirect expenses can be partially deductible. This includes costs associated with your entire home: Property taxes Mortgage interest Rent Casualty losses Utilities Homeowner’s or renter’s Insurance Maintenance and repairs Depreciation The Simplified Method Using the simplified method, you can deduct a flat rate per square foot of the space dedicated to your business. For tax year 2022, that’s $5 per square foot with a maximum of 300 square feet or $1,500.  Remember: Your calculation must focus on the space dedicated to your business, not your entire home. How to Choose Your Deduction Method You can change your deduction method each year to maximize the deduction – and you don’t need a specific reason in order to do so.  It’s best to calculate using both methods and then choosing to use the method that will help you save the most money. Of course, this means …

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Does Working from Home Change Your Taxes?

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The coronavirus pandemic has created a major shift to freelance and remote work. But what does that mean for your taxes? Freelancing Boom As 2020 wore on, many businesses were forced to let employees go or close altogether in an effort to save themselves from massive losses caused by COVID-19 shutdowns. Two million people in the U.S. have taken up freelancing in the last twelve months, increasing that proportion of the workforce from 28% (where it had hovered steadily for nearly 5 years) to 36%, according to NPR. Freelancing and Taxes As more people head towards freelancing and independent contracting, individuals and businesses who make use of these new avenues and hire them for gigs of all sizes, the amount of 1099 filing, specifically 1099-NEC and 1099-MISC, will increase, too. Rather than send W-2s as you would with an employee, businesses that hire independent contractors will need to prepare a 1099-NEC to report non-employee compensation that totals more than $600 in a year, which includes but is not limited to the wages you are paying the non-employee. Self-Employed vs. Working from Home Employees who are now working from home may feel entitled to tax deductions for the expenses they incur as a result of using their own resources (utilities, office supplies, electronics) to compensate for their loss of office or workspace. But when it comes to taxes, there’s a difference between being self-employed and simply working from home for a larger company. If you are self-employed, running your own business from the comfort of your home, you are and have always been able to deduct home office expenses. Unfortunately, this is not the case for those who work from home and do not own their own business. Does that mean employees are on their own in purchasing the things they need for their new home office? Not necessarily. Employees are encouraged to ask their bosses for stipends to purchase items for their home office. In some cases, employers are …

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