Tax deductions when working from home — everything to know

The self employed may win out vs. traditional employees

As working from home becomes more of the norm and even permanent for some there are some need to know tips when it comes to your taxes.

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If you have purchased new equipment for your home to make remote work more efficient throughout recent months, you may be wondering what you can claim next year.

Things like computers, desk and other related expenses, however, are not deductible for individual employees.

“Unfortunately you cannot claim any business expenses,” Michael Corrente, managing director at CBIZ MHM, told FOX Business. “Prior to tax reform, you were able to claim business expenses as itemized deductions. There’s no longer the ability to claim those as a deduction.”

About 42 percent of the U.S. labor force is working from home full-time, and only about 26 percent are working from their normal place of business, according to Stanford economist Nicholas Bloom,

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Employers, on the other hand, are able to deduct certain reimbursed employee expenses. Corrente said employers can purchase equipment for workers who are working remotely for their own convenience, similar to equipment that would be purchased if the employee were in the office. That may be helpful for companies like Twitter and Facebook, who have extended remote work opportunities indefinitely.

TickerSecurityLastChangeChange %
FBFACEBOOK INC.252.53-2.29-0.90%
TWTRTWITTER INC.40.15+0.80+2.03%

Those items, however, would have to be returned if an employee were to switch jobs.

There is some debate over whether Section 139 of the Revenue Code is applicable to the current situation – and to what extent. This law allows for employers to be reimbursed for “or pay reasonable and necessary expenses” incurred related to a qualified disaster.

The IRS issued guidance reiterating those terms but hasn’t gone any further in clarifying the issue.

Corrente said this part of the revenue code isn’t used that often and there really isn’t a precedent for this situation, but the idea is definitely worth exploring.

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The IRS does provide a tax break for home offices.

However, the law -- as modified by the Tax Cuts and Jobs Act -- applies to self-employed people and small business owners, which means employees do not qualify.

In order to be eligible to claim the deduction on certain expenses, you must regularly use part of your home for the exclusive purpose of carrying out business. You also must be able to show that your home is used as the principal place of business, but you may be eligible even if you conduct business at other locations, too.

You may also be eligible if you use a portion of your home to regularly meet with patients or clients as a routine part of your business schedule.

If you qualify, you are generally allowed to deduct expenses like mortgage interest, insurance, utilities, repairs and depreciation for the home office.

The deduction is available to homeowners and renters and applies to any type of home.

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Self-employed people are also able to claim deductions for office supplies, equipment, software and meals and entertainment.

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