Home Office Deduction

[KarenMMiloPhD]

I am a psychologist working from home using telehealth. I am a W-2 employee of my single-owner S-Corp. I have an office that I will use exclusively for work. I use the internet and my only cell phone for both work and personal use. What deductions am I entitled to take?

[Mike9241 · Accepted solution]

as an employee you cannot take a home office deduction. however, the S-corp can establish an accountable plan where it reimburses you for your H-O expenses.  Under an accountable plan, periodically you submit an expense report to the S-Corp for your H-O expenses. It writes you a check. This amount is not taxable to you and the S-Corp gets the deduction.

see this thread

as to cell phone/internet

When it comes to supporting the business use of your cell phone/internet for tax purposes, there are a few key considerations:

1. Substantiating Business Use:

   • The IRS expects you to be able to substantiate the percentage of cell phone usage that is related to your business. You should keep records that demonstrate the business use versus personal use. These records could include:
     • Texts, Calls, and Applications: Keep records of business-related texts, calls, and app usage.
     • Calendar Entries: Mark your calendar with business-related activities conducted using your phone.
     • Log of Usage: Maintain a log of the time you spend using your phone for business versus personal purposes.
     • Voice Mail Messages: If your voice mail includes business-related information (such as the business name), this can serve as evidence.
   • Remember that you decide the business use percentage based on the facts and circumstances as you kno...¹.

2. Phone Charges:

   • If you have a dedicated phone solely for business purposes, all charges related to that phone can be deducted.
   • If you use your regular home phone or cell phone for both business and personal calls, you can deduct a portion of your bill. Keep itemized phone bills and receipts to ensure accurate deductions¹.

3. Reasonable and Necessary Expenses:

   • A general guideline for business expenses is that they must be both ordinary and necessary.
     • Ordinary: Would a similar business incur this type of expense during the year?
     • Necessary: The expense should be helpful to your business in some way.
   • Keep this in mind when determining the portion of your cell phone expenses that you can deduct¹.