"Most of us would like to pay the IRS as little money as possible each year. And that's where tax credits and deductions come in. A tax credit is a dollar-for-dollar reduction of your tax liability, while a tax deduction allows you to exempt a portion of your income from taxes. If you're in a high tax bracket, claiming the right deductions could result in a huge amount of savings."
"But before you do, it's important to make sure you actually qualify. Believe it or not, you could work from home on a full-time basis and still not be eligible. "This deduction is only for taxpayers who are self-employed," says Mark Steber, Chief Tax Officer at Jackson Hewitt. "It is not for employees who work remotely from a home office." In addition to the self-employment requirement, there are other criteria for being able to claim a home office deduction."
Tax credits reduce tax liability dollar-for-dollar while tax deductions lower taxable income. Taxpayers in high tax brackets can gain significant savings by claiming eligible deductions. The home office deduction is available only to self-employed taxpayers, not employees who work remotely. The home workspace must be used exclusively for work and must be the taxpayer's principal place of business. A room that doubles as dining space does not qualify. Renting external office space for most workdays disqualifies a home office used only occasionally. Claiming the deduction without meeting these requirements can lead to errors; consult a tax professional for personal guidance.
Read at The Motley Fool
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