Home Office Tax Deduction 2023: Who's Eligible To Claim This Tax Break?

People who worked from home in 2022 may be eligible to claim the IRS' Home Office Tax Deduction this year.

Last year, at least 10.6% of workers were given the option to work remotely, particularly in the technology and legal sectors, as per a report from the U.S. Bureau of Labor Statistics. That being said, a majority of employees are not eligible to receive the IRS' tax break, CNBC reported, citing national tax leader of KPMG Private Enterprise Brad Sprong.

How To Qualify For Home Office Tax Deductions

To become eligible for a tax break, a recipient must meet certain IRS guidelines for workspace.

First, part of a recipient's home must be used as their "home office" exclusively for conducting business. The room does not have to have four walls around it. However, Sprong noted that it would be difficult to argue that areas like the kitchen are exclusively used for business.

In addition, the recipient must show that their home serves as the principal place of business. While recipients can conduct business at a location outside of the house, their home should be used substantially and regularly to conduct business.

The IRS noted that the term "home" refers to a house, apartment, condominium, mobile home, boat or other similar properties. It also refers to separate free-standing structures, including the garage or a studio — provided that they use it exclusively and regularly for conducting business.

Calculating Home Office Deduction

There are two ways to calculate how much tax break a recipient can get from the IRS' Home Office Deduction program.

The "simplified option" involves using a standard deduction of $5 per square foot of the area in the house used for business. This is capped at 300 square feet, which equates to $1,500. This option does not change the criteria for who may be eligible to claim the tax break.

The second option is the "regular method," which requires recipients to report the actual expenses of their home office. This may include mortgage interest, insurance, utilities, repairs and depreciation. Recipients must also determine the percentage of their home that is devoted to conducting business activities.