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Non-tax-preparer question: Do I still qualify for the home office deduction?


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I have a home office that has, in the past, met all of the necessary requirements of the deduction. The freelance work I do is very closely related to the work I do 9-5, and since March I've been working that 9-5 job from my home office in addition to doing my freelance work in the same space.

My normal 9-5 office still exists, but it's not really available for me to use for the foreseeable future. 

Do I still qualify for the deduction?

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I suspect you cannot allocate the same physical space to more than one business, unless you allocate the usage.  Could it be logical :), as if you were renting a warehouse, and using it for two businesses, you would be allocating costs based on a formula, such as SqFt.

I would not have a personal issue with using the deduction for the 9-5, since it is now your primary location for that business.

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I was under the impression that the home office deduction was meant for people who are self-employed.  So, my question had more to do with whether it was proper to continue taking the deduction since the use of that space is no longer 100% related to that particular business and source of income... it is now shared with my day job.

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You may have a problem, because under current law, employees can no longer claim home office use as a misc itemized deduction on Schedule A.

In order to deduct home office for your freelance work, you have to meet the "exclusive use test".

So the question is if you use the same space for both functions, have you blown the "exclusive use test" requirement?

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45 minutes ago, Eric said:

I was under the impression that the home office deduction was meant for people who are self-employed.  So, my question had more to do with whether it was proper to continue taking the deduction since the use of that space is no longer 100% related to that particular business and source of income... it is now shared with my day job.

Small separate desk for the 9-5 work.  Can be in the same room as the home office space, but the sqft must not be counted towards the home office usage. Employer should be willing to provide compensation for use of your space and utilities, hopefully accountable basis, or enough to cover your costs and the increased tax (if treated as additional wages).

Or remove the sqft shared with the 9-5 use, and only claim the remaining amount (assuming there is some space not shared).

If you can document less home office use, you may have a number to show your employer as to your "cost" of the space you are providing.

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21 hours ago, Medlin Software said:

Small separate desk for the 9-5 work.  Can be in the same room as the home office space, but the sqft must not be counted towards the home office usage. Employer should be willing to provide compensation for use of your space and utilities, hopefully accountable basis, or enough to cover your costs and the increased tax (if treated as additional wages).

Or remove the sqft shared with the 9-5 use, and only claim the remaining amount (assuming there is some space not shared).

If you can document less home office use, you may have a number to show your employer as to your "cost" of the space you are providing.

I can see that the details of your post makes sense, but I don't think what you propose passes the "exclusive use test".

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23 hours ago, Eric said:

Do I still qualify for the deduction?

Only for the percent of use for your Free Lance business that you are doing as a nonemployee.

As cbslee  pointed out, you can no longer deduct the portion related to employment due to TCJA.

Your continued use an an employee does not trigger the exclusive use disallowance.

Reg 1280A-2(g)(1) explains that exclusive use means the office cannot be used for nonbusiness purposes.  Therefore you still meet the exclusive use test even though your employee use is no longer deductible since it is not considered personal use.

What you need to do is allocate the amount of time spent in your office for your free lance business and deduct that portion.  

ATX has a window for inputting the percent of each business.

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