Working from Home Tax Deduction in the US
Many retired professionals considering working from home on their retirement. Aside from augmenting their income, this move also brings about a lot of personal benefits—personal purposefulness and fulfillment being two of them.
While working after retirement under an employment may have some negative effects on one’s retirement benefits, working from home may means tax deductions.
Americans these days choose the more practical road. That is, by engaging in businesses at the comfort of their homes. These businesses could be virtual enterprise undertaken online while at home, or others establish their own consulting office there.
Regardless of whether you are self-employed or employed and working at your own home, you can avail of home office tax deduction if you use a portion of your home for your business or work.
As a rule, you can claim your home business deduction when you use a part of your home exclusively and regularly as:
- your principal place of business, or
- 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.
Tax deductions may also be availed of as you use a portion of your property for storage use, rental use, or day-care facility use. You are required to use the property regularly for this purpose while not exclusively.
The amount that you can deduct will depend on the percentage of your home that you actually use for the business. Note too that deduction for certain expenses may be limited if your gross income is less than your total business expense.
For those providing daycare services and storing business inventory or product samples are governed by special rules on deduction. And if you are an employee working at home, other additional rules may apply for claiming the home office deduction.
In choosing among your options with regards to your post-retirement plans, it is important to weigh the tax benefits, deductions, and income implications before you embark on the same. This is important as it should form part of your financial and business planning.