tax tips — October 01, 2020

Claiming the Home Office Deduction During Coronavirus—Who Qualifies?

by Susannah McQuitty

A floorplan of a home office

With so many Americans working from home during the Coronavirus pandemic, expenses for work have changed. Instead of paying for gas, employees and freelancers are paying for better internet and upgraded routers. Parents are paying for better desks and home improvements to separate work from home life (while still monitoring online classes for their children).

As expenses change, many are now looking to see if the tax laws will adjust, too—specifically for tax breaks that will make finances easier to manage. The home office deduction is especially taking the spotlight, but qualifying for the deduction is not as simple as working from your laptop at home.

What is the home office deduction?

The home office deduction allows freelancers and self-employed persons to deduct expenses related to a designated office at home that is solely used for business on a regular basis. This can be on a daily, weekly or monthly basis, but incidental or occasional use won’t count.

It’s easy to think “special room of the house” when you hear “home office,” but you actually don’t need an entire room to claim home office deductions. All you need is a space that’s used regularly and exclusively for business, even if it’s the square footage of a desk and a chair.

The other qualifier, exclusive business use, means that your home office is only used for business. Your children could not use the computer to do their homework if you plan to deduct expenses on that computer.

Can employees working from home due to COVID-19 claim related work expenses not reimbursed by their employer?

Unfortunately, no—according to current tax law, only freelancers and self-employed persons can deduct these types of expenses on their taxes. The Tax Cuts and Jobs Act of 2017 suspended the deduction for unreimbursed employee expenses as well as other deductions in exchange for a larger standard deduction.

But you should still track your expenses. New pandemic relief actions are rolling in, and who knows what the next stimulus package might include. A home office deduction that includes employees who must work from home may be on the horizon—it’s not a guaranteed tax break at this time, but better to have your records ready than scramble for them next year if a deduction becomes available.

Is there any financial aid for employees who have to work from home?

Good news here: Even though employees can’t deduct unreimbursed expenses for working from home on their personal tax returns, some employers offer to reimburse those expenses.

In particular, some larger tech companies with computer-based staff have chosen to help pay for home office equipment through an allowance or stipend, or by reimbursing specific expenses such as internet bills. Others have issued company equipment, such as laptops, to their employees. Check out your state’s laws on employer-reimbursed expenses, too—some states, such as California, go so far as to require employers to help out with the costs of working from home.

If work-from-home expenses are adding up and your employer is not willing or able to help out, keeping good records of all your work-related expenses is still key. Not only should you keep that information on hand in case you are able to use it on your tax return next year, but there’s also the possibility that your employer may voluntarily help out with those expenses—and it’s much easier to talk to your employer about getting some assistance if you have an itemized list of needs.

Want to stay in touch? We’ll keep you updated.

As new laws and tax relief come into play, we’re dedicated to keeping our blog readers informed so you can make the best decisions during this chaotic time. Subscribe to the blog to get our newsletters, and we’ll make sure you have all the information you need to stay on top of your taxes and finances during the COVID-19 pandemic.

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