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Are homebound employees during COVID eligible for home office deductions?

March 8, 2021  |  Corey Butler

Are homebound employees during COVID eligible for home office deductions? After the COVID-19 pandemic took hold across the U.S. in March 2020, most states experienced various levels of shelter-in-place edicts, requiring many employees to work from home if able. Minnesota maintained that order through the duration of 2020 (and it’s still in place now).

This has left many people wondering if, like those who are self-employed and contractors, if they can benefit from home office deductions offered by the Internal Revenue Service and the Minnesota Department of Revenue.

We turned to Joe Rubenstein, CPA, a partner with Froehling Anderson Ltd in Minneapolis, to help break down what these unusual circumstances mean for the ongoing benefits of the home office deductions.
  1. How do I qualify for a business use of home deduction?
    You must meet specific requirements laid out by the IRS to qualify for a business use of home deduction. Even if you qualify, the deductible portion of your expenses still may be limited. To qualify for deducting expenses, you must use part of your home on a regular basis exclusively as your principal place of business. 
  2. What does regular exclusive use mean?
    You must have a dedicated area in your home or a detached structure that is only used for your business in order to pass the regular and exclusive use test. You will not meet the requirements if you use the area for both personal and business use. For example, if you are using your kitchen table as your office area, which you then use to serve meals there, you would not qualify.
  3. What if I’m an employee of a company and I work from home?
    Prior to the Tax Cuts and Jobs Act of 2017, you could take a deduction for a home office expense deduction as a miscellaneous itemized deduction. For the tax years 2018 through 2025, you are not allowed to take a home office expense as an employee. None of the federal legislation passed in 2020, like the CARES Act, addressed this.
  4. What types of expenses qualify for the business use of home deduction?
    Expenses for business use of home fall into two categories: direct and indirect expenses. Direct expenses are expenses that are only for the business portion of your home, i.e., painting or repairs.  Indirect expenses are expenses that are for the cost of maintaining your entire home, i.e., insurance, property taxes, interest, utilities and general repairs.
  5. What are the methods for calculating my business use of home deduction?
    There are two methods to calculate your business use of home deduction: the business percentage method and the simplified method. 
The business percentage compares the size of your home that is used for business compared to the total size of your home. For example, if your office space that is exclusively used for business is 240 square feet and your home as a total of 2,400 square feet, your business percentage would be 10%.  You would be allowed to take 10% of all your qualifying indirect expenses.

The simplified method is based on the square footage of your home exclusively used for business multiplied by $5 and limited to $1,500.  If your home office is 240 square feet, your home office deduction would be $1,200 (subject to income limitations).
Connect with a CPA
Still unsure about if you qualify for any home deduction benefits, or do you have other questions related to your tax situation? Find a certified public accountant by visiting CPAmeASAP.com.

Topics: Taxation-Individual, Staffing, Work-Life Balance, Taxation-Business

Corey Butler

Corey Butler is the MNCPA communications manager, working to enhance members’ professional reputations through content, media relations and public affairs. Corey keeps busy outside of the MNCPA spending time with his wife and children, serving on his local school board, volunteering in his community and catching up on long-lost hobbies. Corey enjoys the works of John Steinbeck and J.K. Rowling, and Paul Bunyan, Robin Hood and Santa Claus lore. You may reach him at 952-885-5533 or cbutler@mncpa.org.

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