Can I claim a tax deduction for working from home as an employee? I work there 90% of the time
I'm working for a company as a computer programmer, but 90% of my work is done at my apartment. Let's say I have an exclusive space for the work in my apartment, can I claim tax deduction for the renting space? My company has an office but there's no desk for me in there, and I bought my PC and everything by myself.
I'm in the US, and live in CA.
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The general rule is:
Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:
As your principal place of business, or
As a place to meet or deal with patients, clients or customers in the normal course of your business, or
In any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.
Exclusively seems to be the toughest standard and I do not know exactly how strict the IRS's interpretation is. Working in your living room where you regularly watch TV and have people over on the weekends would seem to fail that test. A separate room with your computer in it would pass it. If it was your only computer and you regularly played online games with it, that would seem to be a grey area.
The IRA booklet covering this area is here www.irs.gov/pub/irs-pdf/p587.pdf I know people that have rented rooms in other places or made use of rental offices for this purpose.
Talk to a tax professional. The IRS really doesn't like the deduction, and it's a concept (like independent contractors) that is often not done properly.
You need to, at a minimum, have records, including timestamped photographs, proving that:
The part of your home used for business is exclusively for your business. If your wife works out of the room, you can't deduct.
You need to use the space regularly for business.
It needs to be a principal place of business. "Principal" has a specific meaning.
Remember, documentation is key, and must be filed and accessible for a number of years. Poor record keeping will cost you dearly, and the cost of keeping those records is something that you need to weigh against the benefit.
90% sounds like "principal place of business" but check these IRS resources to make sure.
The short answer is yes you probably can take the deduction for a home office because the space is used exclusively and you are working there for the convenience of your employer if you don't have a desk at your employers office.
The long answer is that it may not be worth it to take the home office deduction as an employee. You're deduction is subject to a 2% AGI floor. You can only deduct a percentage of your rent or the depreciation on your home.
A quick and dirty example if you make k/year, rent a 1200 sqft 2 bedroom apartment for 00/month and use one bedroom (120 sqft) regularly and exclusively for your employer. You can deduct 10% (120sqft/1200sqft) of the 000 (00*12 months (assumes your situation didn't change)) in rent or 00. However because you are an employee you are subject to the 2% AGI floor so you can deduct 00-00 (75000*.02 (salary * 2% floor)) = -300 so in order to deduct the first dollar you need an additional 0 worth of deductible expenses.
Depending on your situation it may or may not be worth it to take the home office deduction even if you qualify for it.
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