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How the Home Office Deduction Works for Freelancers?

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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 taxes. Covid-19 changed the world in many ways, and one result was that we saw what it would be like if all the kinds of work that can be done from home...actually were done 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.
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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

How to know if you qualify for <span style="background: linear-gradient(101.76deg, #19ACA4 1.98%, #3563CD 100.59%);
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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.

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 tax write-offs that self-employed people and freelancers can take advantage of. Tax write-off for working from home has helped save a lot of freelancer during the pandemic. Check out some of the other major deductions that are available to taxpayers who work for themselves and who have business use of home.

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.

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

How to know what what you can deduct as travel tax deductions when you're on a business trip.

Food and Entertainment Deduction

For 2021 & 2022 only, the full cost of business-related food and beverages is tax deductible – but not everything can be deducted. As a freelancer, you need to know what food & entertainment expenses count as write-offs.

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.

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.

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