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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.

  • 4
    Be careful to keep very good records if you do. This is apparently one of the better ways to find yourself on the receiving end of an audit. – fennec Jan 25 '11 at 15:50
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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 $75k/year, rent a 1200 sqft 2 bedroom apartment for $1000/month and use one bedroom (120 sqft) regularly and exclusively for your employer. You can deduct 10% (120sqft/1200sqft) of the $12000 ($1000*12 months (assumes your situation didn't change)) in rent or $1200. However because you are an employee you are subject to the 2% AGI floor so you can deduct $1200-$1500 (75000*.02 (salary * 2% floor)) = -300 so in order to deduct the first dollar you need an additional $300 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.

  • Since rent in my area is very high, and my income is (unfortunately) much less than 75000 as you calculate, it seems like I can claim deduction even with the 2% AGI floor. But since it is a little, it may not really help much anyway, as you point out :( – furi2 Jan 26 '11 at 3:57
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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.

  • Good to know at least it's possible to file it. I just wasn't sure if I could do that even if I'm not self-employed. The definition of the exclusive space was my next question, that's kinnda why I wrote "let's say I had it.." Sounds like it's not very simple job. Thanks for the response. – furi2 Jan 25 '11 at 7:34
  • Some companies discourage employees from deducting because they don't want to deal with the hassle as well. – duffbeer703 Jan 25 '11 at 12:27
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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 http://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.

  • Thenks for the response. Good to know at least it's possible to file it. I just wasn't sure if I could do that even if I'm not self-employed. The reason that was asking was that I'm looking for a new apartment for rent, and wanted to determine how much I could afford. I thought tax-deduction would help. If I found an apartment, I reserve one room for the office. I'm single, live by myself. – furi2 Jan 25 '11 at 7:31
  • There are psychological benefits to keeping your business and computer in a different room than your bedroom. It may be an extra tax pain to file this, but may be worth it to keep work stress compartmented away from sleep and the rest of your life. – SpecKK Jan 26 '11 at 0:59
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90% sounds like "principal place of business" but check these IRS resources to make sure.

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