So you’ve been working from home this year as a result of the pandemic. Maybe your office went entirely remote and you’ve been having daily Zoom meetings with coworkers and clients. Or perhaps you were laid off and are now doing freelance or contract work from the comfort of your own home. With tax season looming, you may be wondering if you qualify for any home office tax deductions. Before you start making a list of write-offs, there are some things you need to know.
I’m working remotely from home. Do I qualify for home office deductions?
In years past, an employee was often able to claim itemized deductions for unreimbursed employee business expenses. For example, if you used a home office for the convenience of your employer, you could lump home office expenses together with other expenses, such as tax preparation and union dues. But the Tax Cuts and Jobs Act suspended write-offs for these types of deductions for employees through 2025.
What does that mean for you?
“Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home,” according to the IRS.
The IRS notes that the taxpayers who are self-employed must meet two basic requirements to qualify for the deduction:
- The taxpayer must use a portion of the home exclusively for conducting business on a regular basis.
- The home must be the taxpayer’s principal place of business.
Stay tuned, though. There is a chance the rules could change if Congress grants additional Covid-19 tax relief that includes allowing for home office deductions for employees during the pandemic.
Can you write off utilities and travel?
If you’re working from home for an employer during the pandemic, there’s a good chance your utility bills went up because you’re using your household electricity to get your job done. You may even be using your car to travel to clients. If, however, you’re looking to get reimbursed for these expenses through your taxes, you’re probably out of luck.
As part of the Tax Cuts and Jobs Act, the category of “miscellaneous itemized deductions,” which includes unreimbursed employee expenses such as utilities and travel, was suspended. As a result, any additional costs an employee may incur as a result of working from home are not deductible in most cases.
Talk to your employer
For those who have been working from home for an employer during the pandemic, the IRS suggests asking your employer to reimburse you for reasonable and necessary costs you’ve incurred during this difficult time. For instance, if you’ve seen a spike in your utility costs, paid out travel expenses, had to upgrade your internet package, or spent more on child care because you’re working remotely, go ahead and ask your employer for reimbursement, making it clear that you won’t be able to deduct those expenses on this year’s taxes. Just keep in mind that your employer has no obligation to reimburse you for such expenses.
Source:
Brougham, Rachel. Home Office Tax Deduction: What Remote Workers Need to Know Before Filing for 2020, www.msn.com/en-us/money/taxes/home-office-tax-deduction-what-remote-workers-need-to-know-before-filing-for-2020/ar-BB1bxat9.