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How the Home Office Deduction Works for Freelancers?

If you're a freelancer or self-employed person working out of your home office, you know there's truly nothing like working from home. And one of the greatest perks of being a work-from-home freelancer is the home office deductions you can claim when you file your 1099 tax. If your taxes are over $1,000 use an estimated tax calculator to pay quarterly taxes. COVID-19 changed the world in many ways, the main one being the rise of working from home. The change left many people wondering whether working from home is tax deductible. But with so many new freelance workers entering the workforce, and so many more people setting up home offices, the conversation about how this affects your taxes is even more important. There is a lot of useful information in this complete guide on tax deductions for freelance and start-up businesses, but it's worth looking specifically at home office deductions, because there's a lot of opportunity to save on taxes.
Image showcasing examples of self-employed individuals and freelancers who use their home offices, including artists, musicians, business coaches, dancers, gamers, and therapists. No mention of 1099 or taxes.

Table of contents

Do you qualify for home office deductions?...Read more

How to know if you qualify for the home office tax deduction...Read more

Exceptions to the IRS home office deduction rules...Read more

What to deduct: standard vs. simple option...Read more

Other deductions for self-employed individuals...Read more

Do you qualify for home office deductions?

There are probably a lot more business uses for an area of your home than you would expect, and if you use the space in the right way, it can help you pay less at tax time. People working in the arts who practice or rehearse in their home can take the deduction for work from home. Musicians, ceramicists and other artists who give lessons in their home studios can take the deduction for that business use of home as an office space, too. The same goes for hairstylists, massage therapists, online teachers and doctors providing consultations online. Digital personal assistant services have become a rising trend in recent years, and so have professional gamers who offer subscribers access to their streamed gaming sessions. In addition to the freelance writers, graphic designers and online sellers we're familiar with, these kinds of work from office space all qualify for a tax deduction.

How to know if you qualify for the home office tax deduction

Guidelines for home office tax deduction - exclusive and regular use, principal place of business, only used for work. Relevant for self-employed, 1099, and freelancers for taxes.
The IRS is pretty clear about what qualifies as a home office tax deduction, and that makes some freelancers feel that these deductions might be an audit risk. But as long as your use of your home office fits the following criteria, you're in the clear. A designated area of your home needs to be exclusively and regularly used as an office, and it should be your principal place of business. To clarify, the office in your home needs to be a space you use for your work, and your work alone. It could be a second bedroom, a corner of your living room with a desk, even a closet. But you can't use that space for anything else. If you sleep, cook breakfast or brush your teeth in the same place where you sit down to work every day, that area can't be considered an office – and it can't be tax write-offs for working from home. Also, if this is just one of the places you do work for your business, in addition to the co-working space downtown or the coffee shop down the street, it won’t qualify for the deduction for work from home. You also can't write off your mortgage if you have a home office. On the other hand, the business use percentage of your mortgage interest is tax-deductible.

What does the IRS mean by "exclusive use"?

"Regular use" can mean many things

Exceptions to the IRS home office deduction rules

There are some kinds of businesses that need to use the entire house, or more than one specific area, to be able to provide the services their clients need. The IRS understands that and allows those businesses to claim the work from home business tax deductions.

Daycare providers

Home storage

What to deduct: standard vs. simple option

Work from home tax deductions can be one of the most important ways for self-employed people and freelancers to minimize the amount they pay in taxes. That's why it's essential to know how to do the math and figure out how much you can write off. For that, there are two options.

Option 1: standard

Option 2: simplified

Other deductions for self-employed individuals

The work from home tax deductions are just one of many self-employment deductions that freelancers can take advantage of. Choosing to itemize your tax deductions only affects SE tax so make sure you also claim the standard or itemized deduction when paying federal tax. Check out some of the other major deductions that are available to taxpayers who work for themselves and who have business use of home.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

Home Improvement Deduction

What qualifies as a home improvement tax deduction and how homeowners who are self-employed or freelancers can benefit most.

Travel Expense Deduction

If you travel for work as a freelancer, there are a number of travel expenses you can claim as tax deductions in 2023 – find the details here.

Food and Entertainment Deduction

For 2023, you can deduct 50% of the cost of business meals as tax deductible – but not every meal can be deducted. This is relevant to self-employed people.

Car depreciation tax

Here's how to take advantage of depreciation, one of the biggest tax deductions people who use their car for work can take.

Car tax write off

Many freelancers drive their own vehicle for business and may qualify for certain car and mileage tax deductions.

Moving expenses deduction

Until recently, you could deduct moving expenses on your tax return. Recent changes to the tax rules have impacted whether you can deduct moving expenses.

Simplified home office deduction

If you use space in your home as an office for your business, you can take either the actual home office deduction or the simplified home office deduction.

Rent Tax Deduction

If you're self-employed, there are few ways you can write off your rent, and if you know how to use them, they can be among the most important ways to save money on taxes each year.

Side Hustle Taxes

Self-employed individuals can write off business expenses when filing side hustle taxes. You can avoid paying taxes on side jobs if your net income is under $400 in a year.

Mileage Tax Deduction

Get a car mileage tax deduction using either the standard mileage deduction or actual expenses deduction. You will report this on Schedule C.

Cell Phone Tax Deduction

A cell phone tax deduction is available to self-employed individuals if it is used for their business. They can also write off their internet usage.

Business And Consultant Tax Deduction

Consultant tax write-offs are useful in lowering self-employment taxes. Sole proprietors can use a QBID to lower taxable income, as they are a pass-through business entity.

Is Credit Card Interest Tax Deductible?

Credit card interest is tax-deductible if it is from a business-related purchase. You can write off a portion of the interest even on a personal credit card if it comes from a business expense.

Are Office Expenses Deductible?

The home office tax deduction is used to write off your home office and office-related expenses. Claim it using the standard or simplified method.

Advertising And Marketing Expenses Deduction

Marketing tax deductions related to promoting a business can be claimed by self-employed individuals. Report them on Schedule C.

Business Startup Costs and Deductions

Business startup costs can be amortized over 15 years. You can also deduct up to $5,000 in the first year if total costs are below $50,000.

Vehicle Write Off For Business

Vehicles used for business can be a tax write-off in 2023. You can claim this deduction even if you lease your vehicle under the actual expenses method.

Are Subscriptions Tax Deductible?

Subscriptions are tax deductible for self-employed individuals. You can write off the business use percentage as a tax deduction on Schedule C.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

What’s FlyFin?

FlyFin is the most powerful A.I.-powered tax service for freelancers, gig workers, independent contractors and sole proprietors. FlyFin tracks all your business expenses automatically to find every possible tax deduction. And anyone can file taxes through FlyFin. Our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. Download the FlyFin app for the CPA team to file your taxes for you and get more tax savings than you had last year, guaranteed.
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