Home Office (October 2020)

Tax Tips

Home Office Deduction

By Michael Aston, E.A.
Alhambra Tax Center


Please note: the information in this article is accurate at the time of writing. And Tax Law can, and will, change in the future

With COVID-19, I have been getting quite a few clients asking about what they can deduct while working from home. Unfortunately, there is no Federal deduction for working from home at this time.

However, the State of California still allows “Unreimbursed Business Expenses” if you itemize and qualify. All the criteria below must be met:

·       Exclusive Use Test. This is met if a specific area of the home is used only for business.  The area can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition. This test is not met if the taxpayer uses the area both for business and personal purposes. Using the dining room table during the day as your office space and then using it for family meals will disqualify you.

·       Regular Use Test.  A taxpayer must use a specific area of the home for business on a regular basis. Incidental or occasional business is not regular use. All facts and circumstances are considered in determining whether a business us is regular.

·       Trade of Business Use Test.  A taxpayer must use part of the home in connection with a trade or business. If the use is for a profit seeking activity that is not a trade or business, the business use of the home deduction is not allowed.

·       Employee Business Use of Home. 

o   The home must be for the convenience of the employer.

o   The employee must be able to itemize deductions on a Schedule A.

o   The employee is not renting the home office to the employer.

If you would like to learn more about home office deductions you can go to IRS.gov or ftb.ca.gov, you may also contact your tax preparer.

If you filed an extension to file your tax return late, it is due October 15th. Any tax returns with a balance due that are not filed by the 15th will receive a late filing penalty, dated back to July 15th.