My situation: I work online, remotely, from home in Texas, for a company in Virginia. This is full-time remote, I almost never travel to the office in Virginia. I work a full-time 8-hours-a-day, almost-every-week-of-the-year job, like most people.
I work in my apartment’s living room, which serves as my “office.” According to my layman understanding, if my apartment is 800 square feet, and the living room is 240 square feet, and I only use one-third of that living room space as an office, then I can claim 80 square feet as a “home office?”
What would I be getting a tax refund on? If I pay $9,300 a year in apartment rent, and 10% of my apartment space qualifies as a home office (that is, 80 out of 800 square feet,) then would I get to claim $930 as home office expenses, and get a tax refund that would amount to a certain fraction portion of the $930? Or do I have this completely misunderstood?
IANATA but you can deduct home office space only if that space is exclusively used for your work. It’s OK if it’s only part of a room, in fact, the IRS publication uses that as an example. You will need to file Form 8829. I haven’t walked through the whole form to see if if you can deduct the full amount, or if it is only the amount over some threshold (as is done with misc. employee expenses for example). If there is no threshold then your arithmetic works.
You’ll want to read the rules very carefully. I looked into this ~10 years ago, and ISTR that if you want to deduct a part of your home as an office then you need to be using that space very exclusively for office purposes:
I see CookingWithGas cooked with gas and beat me to it.
Home office is one of the big audit flags. No, being audited does not mean that you did anything wrong. But it does mean that you should be more diligent in making sure you did everything right. As others said, it should be an exclusive area. Ideally this means not doing work on your gaming computer, etc. Read Pub 587 and the instructions for 8829. And possibly Pub 334. See the things you can and cannot deduct. Prorated rent may be applicable. An accountant might be recommended, YMMV.
Make sure that the home office is for the employer’s convenience and not for your convenience. For example, if you could make a daily commute to an office space provided for you, then working from home would really be for your convenience. (In this case, it probably is for the employer’s convenience. Just having you in another state is probably a nightmare for their payroll.)
Exclusivity is the biggest deal. It doesn’t have to be exclusive use of a whole room, but what you claim does have to be exclusive. There was a recent court ruling in which exclusive use was denied because the taxpayer had to walk through the “home office” to get from one part of the house to another. Walking through was personal use and thus the whole deduction was denied.
From the deduction end, you do have it right, but remember one more thing: as an employee, your home office deduction is part of form 2106, which goes to Sch A. So you won’t get any benefit until you 1) itemize your deductions and 2) have total unreimbursed expenses more than 2% of your AGI. For most renters: not likely to benefit you.
