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Housekeeping and your home office deduction

If you have an office in your home that qualifies for the home-office deduction, and you employ a housekeeper who maintains both your home and your home office, there are a couple of tax considerations to keep in mind.

The amount you pay your housekeeper for their services can have an impact on your taxes. Let’s assume you pay $200 every two weeks, totaling $5,200 annually. Say your office is 15 percent of your home. In this case, you pay $780 to clean your office and $4,420 to clean your home.

Here are two key questions:

  • Should you pay your housekeeper through a W-2 or a 1099 for the office cleaning?

  • Do you need to pay the Nanny Tax for the home cleaning?

The answers depend on whether your housekeeper is considered an independent contractor or an employee.

Given the conditions of their work—they clean with little or no direction, provide their own supplies, and clean many other houses—then they exhibit the characteristics of an independent contractor.

Accordingly, for the $780 you paid to clean your office, you should provide them with a 1099-NEC form. On the personal side, you are not liable for the Nanny Tax because the housekeeper qualifies as an independent contractor.

Please note that if you fail to file Form 1099-NEC, you could face an intentional disregard penalty of $630 or more for each missed form.

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