Self-employed people can generally deduct office expenses on Schedule C (Form 1040) whether they work from home or not. This write-off covers office supplies, postage, computers, printers, and all the other ordinary and necessary things that you need to run a home office. The Tax Cuts and Jobs Act also eliminated other unreimbursed employment-related expenses, such as professional business license fees, work-related supplies, and travel expenses. Get matched with a tax pro who knows what you need, whether filing personal, self-employed or business taxes. “If you’re moving state to state, talk to your tax professional, let them know your situation and then they can better advise,” Obih says.
The IRS allows you to deduct expenses for having a dedicated space where you regularly and exclusively conduct your self-employed business. This is true whether you live in a house, apartment, condo, mobile home or boat, as well as external structures like a barn, garage or workshop. When using the direct method, you also need to account for depreciation of a portion of the house if you own it. You don’t need to worry about calculating this when using the simplified method for taking the home office tax deduction.
If I’m an employee and my job is fully remote and I have working from home, can I deduct my work-from-home expenses?
Remote work has become part of our new normal and in September of last year alone, 45% of full-time employees reported working from home in some capacity, according to a Gallup survey. And if you’re one of the millions of remote workers who works from their kitchen table daily, you may be wondering about the home office tax deduction. But, if you work for a traditional employer, you won’t qualify for this tax break. (Data show that the number of people working from home nearly tripled over the past couple of years).
Check the IRS website for information on estimated tax payments as well as relevant forms and worksheets, including Form 1040-ES and Publication 505. The other way of calculating the deduction can be a “major tax saver,” Bischoff said. The tax break comes in two flavors, a simplified deduction and a more complex one. In addition, taking the deduction could make it more difficult to sell your home in the future, if you own. That’s because you can depreciate the value of your home office, which could create a tax event later when you sell.
What if your business has just one home office, but you do most of your work elsewhere?
Even in this situation, you’ll generally need to make sure your home office is only in support of your self-employment and not your job as an employee. For other expenses such as phone and Internet, you can split these between working for yourself, as an employee or as a personal expense. For deducting home office space on your tax return, the IRS requires these expenses to be used exclusively for your self-employed business. For instance, going back to the previous example of a 100-square-foot office, the taxpayer would only qualify for a $500 deduction if they decided to use the “standard” one. If they decide to use the square foot allocation of expenses, however, their rent alone will result in a $2,000 deduction. Although there has been an increase in employees working at home since coronavirus, under tax reform, employees can no longer take federal tax deductions for unreimbursed employee expenses like work-from-home expenses.
“For self-employed filers, it will be more challenging for the IRS to catch improper use, though the agency does use several tactics including checking to see if this is a new deduction to narrow in on potential issues.” In 2017, the Tax Cuts and Jobs Act suspended tax write-offs for home office deductions through 2025. That means if you are an employee who gets a W-2 from an employer, you are not eligible for how do taxes work for remote jobs the home office deduction — even if you’re working from home. At the most basic level, this deduction lets you reduce the amount of taxes you owe by claiming the space in your home that’s dedicated to working as a business expense. The 2017 Tax Cuts and Jobs Act eliminated unreimbursed itemized deductions for employees, and Congress never brought them back despite a surge in people working from home.
Tax Tips for Employees Who Work at Home
With so many workers going remote and staying that way, their approach to doing taxes may be changing. Whether you work for a small mom-and-pop or a large, multistate company, being a remote worker can add an extra layer of difficulty to your income tax filing. With the simplified method, you deduct a flat rate per square foot — for tax year 2022, that would be $5 per square foot for up to 300 square feet. You can choose between the simplified method and tracking actual expenses every year. Direct expenses are costs that only apply to your home office, such as furniture and equipment, supplies, and so on.