Trading the kitchen table for a home office

Thinking about creating a more comfortable — and private — work space? Here’s what you need to know about costs, taxes and more.

Now that many employees have become attached to life away from the office — and employers have seen that a remote set-up can work — doing your job from home is here to stay, at least for now. That means a home work space to call your own may be even more appealing than it once was. Here are the key questions you’ll want to ask yourself before planning your new work digs. 

What will it cost?

If you’re only looking to create a temporary or occasional work space, you may want to upgrade an existing area, perhaps with a lumbar-friendly chair, a spacious desk and flattering lighting for video conferencing. You can easily keep the costs of this minimalist approach under $2,000. 

If you expect to be working from home on a regular basis, however, you’ll likely want a dedicated office space, which might involve converting a closet, alcove or under-stair nook and installing a built-in desk and cabinetry. Remodeling projects that convert unfinished space (say, over the garage) and/or adding features like soundproofing, heating and cooling or custom shelving will give you a truly comfortable space but can easily cost $20,000 or more.1 

How will you finance the project? 

Especially if you’re taking on a larger project, it may make sense to finance it by borrowing against the value of your home through a home equity line of credit (HELOC). With this type of loan, you draw only as much as you need, when you need it, and by borrowing rather than dipping into your savings or selling investment assets (another option you might consider) to pay for the renovation, you’re able to avoid any capital gains taxes a stock sale could create. Plus, the interest on a HELOC may be tax deductible, as long as the loan is used to improve the value of your home.

Can you write off the cost on your taxes? 

The money you’re saving by working from home — no commute, no takeout lunches or happy hours with coworkers — might just cover your monthly payments on a HELOC. But don’t count on a big home-office tax deduction, says Vinay Navani, CPA, a shareholder at WilkinGuttenplan. 

First of all, only people who are self-employed are eligible. “W2 employees can’t take the deduction,” Navani says. Secondly, the office space can’t be used for anything besides work to qualify. And even then, the payoff will likely be small: The cost of certain permanent improvements must be amortized over 39 years, and you can generally write off only a small percentage of your regular home expenses, such as utilities and other upkeep costs. 

“Most of my clients decide the home-office deduction isn’t worth the hassle,” Navani says. “Where you can get bang for your buck, though, is office equipment.” As long as you’re self-employed, you may be able to deduct the full cost of work gear, a printer with a scanning function, or a stand-up desk to make doing your job a bit more comfortable, no matter where you are in your house. 

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