Question

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

A. Deductible home office expenses of employees are miscellaneous itemized deductions subject to the 2 percent of AGI floor.
B. Deductible home office expenses of employees are miscellaneous itemized deductions not subject to the 2 percent floor.
C. Deductible home office expenses of employees are for AGI deductions limited to gross income from the business.
D. Deductible home office expenses of employees are for AGI deductions not limited to gross income from the business.

Answer 1

The correct answer is A, where deductible home office expenses of employees are miscellaneous itemized deductions subject to the 2 percent of AGI floor. These deductions must exceed 2 percent of the employee's AGI to be eligible, and this rule applied before the Tax Cuts and Jobs Act of 2017 suspended the deductions for tax years 2018 through 2025.

Step-by-step explanation:

The correct statement regarding limitations on the deductibility of home office expenses of employees is A. Deductible home office expenses of employees are miscellaneous itemized deductions subject to the 2 percent of AGI floor. This means that in order to deduct these expenses, they must exceed 2 percent of the employee's Adjusted Gross Income (AGI). For instance, if an employee has an AGI of $50,000, only the home office expenses that exceed $1,000 (which is 2 percent of $50,000) could potentially be deducted. Additionally, these deductions were suspended for the tax years 2018 through 2025 by the Tax Cuts and Jobs Act of 2017. Prior to this suspension, employees could itemize such expenses if they were necessary for their job and not reimbursed by their employer.