Home office deduction on schedule A. I work exclusively from home and receive a w2. What is maximum deduction allowed?

nrando — Tue, 04 Jun 2019 22:42:59 GMT

The IRS limits the total of certain kinds of home office...

MichaelDC — Tue, 04 Jun 2019 22:43:00 GMT

The IRS limits the total of certain kinds of home office expenses - the ones you would not be able to deduct anywhere else on your tax return, such as your utilities and repairs - to the income earned from activities in your home office.

Most of the time, your income from the home office (your W-2) far exceeds the home office deduction and is, in a sense, irrelevant.

Here's how it works. Let's say

- Your business income before any expenses was $10,000

- All business expenses that would not limit your home office deduction were $4,000, and

- The home office expenses were $3,000

1). If 90% of your income came from business conducted in your home office, then you can deduct all of your home office expenses:

- $10,000 X 90% of income from the home office = $9,000 from business use of the home

- $9,000 - $4,000 other expenses = $5,000 available for home office expenses

- $5,000 is greater than $3,000 home office expenses, so you can deduct all of them.

2). However, if 60% of your income came from business conducted in your home office, then your home office expenses will be limited:

- $10,000 X 60% of income from the home office = $6,000 from business use of the home

- $6,000 - $4,000 other expenses = $2,000 available for home office expenses

- $2,000 is less than $3,000 home office expenses, so you can deduct $2,000 of them this year, and carry the remaining $1,000 to next year.

3). In addition, if 30% of your income came from business conducted in your home office, then you would not be able to deduct any of them this year:

- $10,000 X 30% of income from the home office = $3,000 from business use of the home

- $3,000 - $4,000 other expenses = $0 available for home office expenses (this will never be less than zero)

Note: The home office, as all other Miscellaneous employee expenses, such as mileage, computer purchase, etc., are subject to a 2 percent floor. This means that only those amounts that are greater than 2 percent of your adjusted gross income can be deducted. For example, if your adjusted gross income is $100,000 and your total miscellaneous deductions are $4,500, you can deduct only $2,500 -- 2 percent of $100,000 is $2,000, and the amount over that is deductible.

topic Home office deduction on schedule A. I work exclusively from home and receive a w2. What is maximum deduction allowed? in Deductions & credits

Home office deduction on schedule A. I work exclusively from home and receive a w2. What is maximum deduction allowed?

The IRS limits the total of certain kinds of home office...