Editors' pick: Originally published Feb. 10.
The first Sunday in February brings a lot of excitement with the last NFL game of the season - the Super Bowl. But February also marks the start of the busiest time of the year for accountants - tax time, or as some tax professionals consider it, their own personal "Super Bowl."
By now, you should have received most of your pertinent tax documents and may have already gotten organized and started working through what deductions may be available to you. One deduction, the home office deduction, is not nearly utilized as much as it could be. The IRS claims that 26 million Americans have home offices, but just 3.4 million taxpayers claim the home office deduction.
Are You Eligible?
A home office is exactly what it sounds like - an office in your home. Traditionally, the home office deduction is most associated with small business owners, but certain employees may be eligible for the deduction as well.
All types of folks may have an office in their home, but for it to be deductible for tax purposes, the space must be used exclusively and regularly for business purposes; it can't be used for personal activities. The office could be in a separate room or in the same room as your personal activities, as long as there is a clear physical divide. In addition, the home office must be a principal place of business or a place where you meet with clients regularly.
For employees of companies, you generally aren't allowed to take the home office deduction unless you work at home for the convenience of your employer. For example, if your employer doesn't have a physical office location, you may be eligible to take the home office write-off. However, if your employer does have an office, but you happen to work from home every Friday for your own convenience, you're technically not eligible to take the office deduction.
"Most employees will have a tough time meeting the conditions to take a home office deduction," says David Oransky, a CPA financial planner for Laminar Wealth. "Even if they are eligible, they would have to itemize deductions on Schedule A instead of taking the standard deduction, which may not be advantageous."