"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."
"Working from home is more common these days than it was prior to 2020, when the pandemic forced countless companies and employees to adopt that arrangement. And if you work from home, you may be inclined to try to take a home office deduction on your tax return. 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."
Tax credits reduce tax liability dollar-for-dollar while deductions lower taxable income. High-bracket taxpayers can realize substantial savings by claiming appropriate deductions. The home office deduction applies only to self-employed individuals, not to employees who work remotely for an employer. The space claimed must be used exclusively for work and must serve as the primary location of business activity. Shared or multiuse rooms, such as a dining room that doubles as an office, disqualify the deduction. Full-time remote work as an employee does not meet the self-employment requirement for the home office deduction.
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