This Potentially Lucrative Tax Break May Be Off the Table for You This Year
Key Points
Deductions help exempt income from taxes.
Claiming a home office deduction on your tax return could put money in your pocket.
There are strict rules as to who can and cannot claim this deduction.
- The $23,760 Social Security bonus most retirees completely overlook ›
This article is intended for educational purposes only and is not tax advice. For guidance on your personal situation, please contact a tax professional.
Most of us would like to pay the IRS as little money as possible each year. And that's where tax credits and deductions come in.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
A tax credit is a dollar-for-dollar reduction of your tax liability, while a tax deduction allows you to exempt a portion of your income from taxes. If you're in a high tax bracket, claiming the right deductions could result in a huge amount of savings.
There's one popular tax deduction you may be thinking of claiming this year. Before you do, make sure you actually qualify.
Are you really eligible for a home office deduction?
Working from home is more common these days than it was prior to 2020, when the pandemic forced countless companies and employees to adopt that arrangement. And if you work from home, you may be inclined to try to take a home office deduction on your tax return.
But before you do, it's important to make sure you actually qualify. Believe it or not, you could work from home on a full-time basis and still not be eligible.
"This deduction is only for taxpayers who are self-employed," says Mark Steber, Chief Tax Officer at Jackson Hewitt. "It is not for employees who work remotely from a home office."
In addition to the self-employment requirement, there are other criteria for being able to claim a home office deduction.
First, your home office has to used exclusively for work purposes. If you have a room in your home that doubles as a dining room/office, you don't qualify.
Secondly, your home office must constitute the primary location you work from. If you rent office space that you use four days a week and have a dedicated space at home for one workday a week, you also don't qualify.
Don't make a big mistake
If your goal is to lower your 2025 tax bill as much as possible when you file your tax return this season, you may be inclined to chase as many deductions as you can. But Steber says it's important to be cautious -- especially in the context of the home office deduction, which tends to be subject to misinformation.
"Please be on the lookout for bad advice on social media related to this tax deduction," Steber says. "If a taxpayer tries to claim the deduction and they don't qualify, it will cause a delay in processing a tax return."
If you want to be sure you're claiming credits and deductions you're eligible for, talk to a tax professional, Steber says. That way, you get the peace of mind that comes with knowing you're not making a huge mistake.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
The Motley Fool has a disclosure policy.
Recommended Articles
