Updated 2-6-24 for 2023 tax year. April is fast approaching and Notaries want to get the most out of their 2023 tax returns. The Notary Bulletin asked Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block, for tips for those claiming a home office deduction for the 2023 tax year.
This is general information only, and every person’s tax situation can differ when it comes to general Notary tax tips and mileage deductions. If you have specific questions about your tax situation, contact the IRS or your tax advisor.
Reminder: Starting in 2018, the home office deduction is available only to self-employed taxpayers. The deduction cannot be claimed by employees because the overall deduction for employee business expenses is not available. Although many employees had to work from home for all or part of 2023 because of hybrid work arrangements, there are no changes to the law. That is, the itemized deduction for employee business expenses is still unavailable.
What are the most important steps Notaries should follow when claiming a home office deduction?
In order to claim the deduction, your home office must be used regularly and exclusively for business purposes. You must designate either a separate room in the house or an area of a room that will be devoted solely to your trade or business.
There are some exceptions to the “exclusive” test for an area used to store inventory, for instance, and also for areas used for daycare businesses.
A simplified “safe harbor” option allows you to deduct $5 per square foot to a maximum of 300 square feet (maximum deduction $1,500) without extensive recordkeeping. Extensive recordkeeping is not required for the safe harbor option, but the maximum $1,500 deduction is designated for a larger room (about 20' x 15'). If your home office is smaller, the deduction is smaller too.
What records should Notaries keep related to home office deductions?
The home office deduction allows you to claim as business expenses a portion of both deductible expenses, such as mortgage interest and real estate taxes, and otherwise nondeductible personal expenses including utilities, home insurance, repairs and depreciation. You must keep all statements and receipts to substantiate these claims.
Where is the home office deduction claimed?
Self-employed taxpayers report the expense on Schedule C, line 30. Taxpayers using the safe harbor method mentioned above can use a worksheet in the Schedule C instructions to calculate the deduction. Those not using the safe harbor must also complete Form 8829, Expenses for Business Use of Your Home, to calculate the deduction.
How will recent tax law changes impact self-employed taxpayers with a home office deduction?
There are no specific changes to the home office deduction. Note that although mortgage insurance premiums (PMI) are not treated as itemized deductions for mortgage interest, Notaries who calculate the actual home office deduction (i.e. don’t use the safe harbor) may use a portion of PMI allocated to the home office deduction.
For other 2023 changes affecting self-employed taxpayers see the “What’s new?” section of the Schedule C instructions. Since taxes change year-over-year consider using a tax professional experienced in small business returns.
David Thun is the Editorial Manager at the National Notary Association.
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