Many companies across various sectors in the United States shifted part of their workforce—wherever possible—to working from home in order to help prevent the spread of COVID-19. Adapting a home into an office or even a classroom represented a significant expense for a large portion of employees. And now that much of the country remains under lockdown and their usual expenses have changed, purchases that could have qualified as deductions on their tax returns are no longer being made, raising the question: can I deduct home office expenses on my taxes?
Purchases of furniture, higher electricity bills, high-speed internet, and even the acquisition of supplies for professional activities—all of which were expenses typically covered by employers in office settings—are among the tax deductions that millions of Americans might expect to claim.
But, up to now, even the CARES Act did not contemplate this possibility.
The current IRS tax rules do not allow W-2 salaried workers to claim a home-office deduction for unreimbursed business expenses related to working from home.
The Tax Cuts and Jobs Act enacted in 2017 and applied starting in 2018, a component of President Donald Trump’s tax reform, brought changes in this area that, prior to that moment, would have allowed millions of Americans to receive reimbursements for home-office expenses not exceeding 2% of their adjusted gross income, provided the employer required remote work, as happened during the coronavirus pandemic.
In short, salaried workers have no way to deduct any expenses related to a home office.
But not all news is grim—there are tax rules that allow certain professionals to deduct most of their costs of working from home.
Self-employed or independent workers
If you work for yourself or are an independent contractor, you can claim a home office deduction. These expenses must not exceed 2% of your adjusted gross income and must meet other strict criteria.
One of the most important conditions is the requirement for a space whose “regular and exclusive use” is devoted to your professional activities. On IRS Form 8829, you would file this along with Schedule C.
Many workers of this type have always been eligible for these deductions, even before the 2017 tax reform.
Even if you are an independent contractor who previously worked in a company’s offices but now does so from home during the pandemic, you can claim these deductions under the same requirements. Just keep records of when you began working from home and your related expenses.
Note that renovations or constructing a dedicated space in your home to serve as your own office do not meet the criteria and are not deductible.
Teachers
USA Today notes that individuals who are teaching online or in the classroom continue to receive a deduction of up to $250 for unreimbursed business expenses for classroom materials, such as books, supplies, computers (including related software) and other supplementary materials used in the classroom. If both spouses are teachers, they can file a joint return for up to $500.
The tax exemption applies to those teaching from kindergarten through 12th grade. This tax exemption does not apply to preschool teachers or university instructors.
Although the legal language states that the equipment and materials must be “used by the eligible educator in the classroom,” most tax experts believe this language could apply to both virtual and physical classrooms, according to Wolters Kluwer Tax & Accounting.
If you fall into this category, you can file your 2020 taxes with the home-office expenses; but if you are a salaried employee, you will not be able to obtain these tax benefits.
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