Does Your House Cleaner Factor into Your Home Office Deduction?

If you’re reading this right now, you likely have an office in your home and you know it qualifies for a home office deduction. You probably also have someone who comes into your home to do the cleaning. This person likely takes care of the entire home – which includes your home office.

Curious how having a house cleaner factors into your home office deductions? More than a few people forget about this entirely. This article will go into detail about determining the answer to this question regardless of whether your house cleaner is an independent contractor or an employee.

A Look at Payments

Let’s say that your cleaning person comes in to tidy up once every two weeks. When he or she does, you pay them $200. If you calculate this for the year, that comes out to $5,200 for the entire year.

Feel free to do your own calculations based on your situation to follow along.

In this example, the home office makes up 15% of the home. This has to be broken down as well. When you do this, you find out that you pay the cleaner $780 annually to clean the office and $4,420 to keep up the rest of your home.

Is Your Cleaner an Independent Contractor or an Employee?

There are a few questions you should ask yourself at this point:

• Is your cleaner paid via a 1099 or a W-2?
• Do you need to pay the nanny tax for the cleaner?

Answering these questions can be challenging if you aren’t sure whether the cleaner is an employee or an independent contractor. So let’s dig deeper into the scenario that we were talking about above.

• The cleaner is responsible for visiting many homes to clean them.
• They also bring their own supplies to handle the job at your home.
• There is little to no direction provided to the cleaner who does the job how they like.

When you look at all these factors, you can see many characteristics that would make the cleaner an independent contractor.

First, they clean as they believe is appropriate and with little direction. In some cases, the cleaner may come in and handle the task while you aren’t even present.

The freedom to complete the tasks with their own methods and the ability to use their own professional judgment may already be pushing you to the conclusion that the cleaner should be categorized as an independent contractor. But there are other factors to keep in mind.

Provision of Supplies

In this situation, the cleaner shows up with cleaning supplies, mops, brooms, and a vacuum. This is yet another piece of evidence that this person is an independent contractor.

Multiple Clients and Houses

This particular home cleaner goes from one house to the next, which indicates they have several clients. Having a variety of jobs related to unique people shows they work independently and are capable of offering services to different individuals.

In this case, there is no agreement for the cleaner to work exclusively for one person. This is another way you can determine that this person is an independent contractor.

Answering Earlier Questions

Earlier, we asked if the cleaner is paid by W-2 or 1099 and whether a nanny tax should be paid to this person. With all the information we’ve just gone over, those two questions can be easily answered.

When you look at the facts we presented, the cleaner is an independent contractor based on their house cleaning and office cleaning services. Since you paid this person $780 to clean the office, it’s required that you provide them with a 1099-NEC.

Moving to the personal front, there is no need to pay a nanny tax to this person. They are an independent contractor in terms of keeping your home clean.

More About the Nanny Tax

The nanny tax may not qualify in this situation but it’s important to understand what it is and whether it applies to any other services you have done in your home. Household employees trigger the nanny tax, including household workers and self-employed caregivers. However, cleaning your house does not make someone privy to this tax.

If you employ someone in one of these positions, you’ll be responsible for tax withholdings, such as FICA, unemployment taxes, and state and federal income taxes.

Those who have a household employee but do not withhold income tax could be responsible for back taxes and a tax penalty. In the worst situations, the person employing the household worker could be charged with tax evasion.

More About the 1099-NEC

As mentioned, it’s mandatory to provide this cleaner with a 1099-NEC. If you choose not to do so, you could be putting yourself into hot water. This is considered an intentional disregard and comes with a penalty of $630 or more based on every instance a 1099-NEC was not provided.

Final Thoughts

When it comes to your home office deduction, there’s likely no reason to worry about the person who cleans the space. However, if you pay this individual $600 or more, there are other considerations, such as providing the person with the Form 1099-NEC.

If you choose to purposefully avoid providing the 1099-NEC, you could be responsible for intentional disregard penalties that can be $630 or more for each filed form. In many cases, you could have failures from previous years so the costs can rack up quite quickly.

As far as your business goes, you need to look at all the facts to determine whether the cleaning person is a W-2 employee or an independent contractor. When it comes to the amount you paid the person to clean the home, you also need to look into whether you will need to pay the nanny tax.

This can be a bit complicated and we hope we’ve provided you with the information you need about cleaning services and home office deductions. To make sure you make no mistakes, it’s best to seek out expert guidance from a qualified accountant. This ensures you optimize your financial benefits and understand all the laws.