Are home office deductions while under mandatory COVID-19 shutdown allowed?

Question of the week: Can a client who has to run her business at home while her office is under a mandatory shutdown take the home office deduction?

April 02, 2020

Q. Can a client who has to run her insurance business at home while her office is under a mandatory shutdown due to COVID-19 take the home office deduction?

My client is an insurance broker who operates her small practice (single-owner LLC) in an office building that is now shuttered because of mandatory county and state orders in this area. She brought home her business laptop, files, paperwork, etc. so that she can run her business from her home as best she can. She has never claimed the home office deduction before this because she’s had a “real” office. Can my client claim the home office deduction while she handles her business from her home? If so, can she use the simplified method for the deduction?

A. Yes, your client is eligible for the home office deduction, but the exclusive and regular rules still apply.

The “regular” component appears to be met since she has essentially brought her business home, which is her principal place of business for the time being. If she has not already done so, she should make sure that the area where she conducts her business is set up so that it meets the “exclusive test.” For example, if she is using part of a family room or basement for this purpose, her desk, computer, files, etc. could be moved to a specific corner of the room dedicated only to her business.

As with any home office deduction, your client may use actual expenses or use the simplified method to calculate the deduction. If she uses the simplified method, the deduction must be pro-rated for the months your client operates the business from home. Count a month as qualified business use if she used the home office at least 15 days. If she decides to use actual expenses she can use only expenses that pertain to the months she is operating the business from home. See IRS Pub. 587, Business Use of Your Home.

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