Can I Deduct My WFH Space on My Taxes? And Other Questions Self-Employed People Have

published Mar 8, 2021
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Tax time is upon us once again, but this year, things feel a little different. Considering many of us spent a great deal of 2020 working from home instead of from a traditional office space, you may be wondering if there are any special “work from home” tax write-offs you can add to your taxes this year. Maybe you had to buy a printer, a desk chair, or some fancy pens to thrive in your new setting — are those items eligible for a deduction or two? What about the actual space you work in, whether it’s your kitchen table, your bed, or a spare bedroom?

To answer those burning WFH questions, we called in the pros: tax professionals, that is. They shared their expertise — and their best tips — to help you tackle Mount Taxes and get things in order before April 15. 

But first, the bad news …

Unfortunately, if you work a taxed nine-to-five job, you’re likely not able to deduct any work from home or home office expenses. This is due to the Tax Cuts and Jobs Act of 2017, which eliminated the home office deductions from 2018 to 2025. Horrible timing, right?

However, accountant and tax professional Eric J. Nisall says you do have an option to save a little cash despite the tax reform law. “You can request reimbursements from your employers such as furnishing a home office, paying for additional bandwidth from your internet provider to better suit working from home … or for subscription services like Zoom or Dropbox,” he tells Apartment Therapy. 

If you’re self-employed, you have more options for deductions, and that begins with your workspace. You can deduct things like electricity and internet service, but you can also claim the square footage of your office space — and it’s totally fine if it’s not a separate room in your home. “Home is a relative term. It doesn’t mean house, it doesn’t mean building, it does not mean ownership – it means where you reside,” Nisall says. “If you live in an RV and it’s big enough to have a desk, you can take a portion of that. It doesn’t matter what the structure is or if you own or rent. As long as it is your residence and you’re paying, you can claim the deduction.” There are some rules around what you can claim, however, so it may be worth working with a pro to make sure you’re within guidelines.

How do I know how much square footage to deduct?

To measure square footage, break into your tool kit (you’ve got one, right?) and grab your tape measure. There are a few different ways you can measure square footage; here’s a helpful guide to figure out what works best for your space. However, if you work from a portion of a room — say, from your bed or the kitchen table — there are some pretty strict rules that prevent you from deducting that space. 

Here’s why: First, you need to be using the space regularly and exclusively for work. “If the space isn’t used exclusively for business, then it doesn’t qualify,” Nisall explains. “If someone takes, for instance, a desk and computer to set up in a space in the corner of the living room or the bedroom separate from anything else — and it isn’t used for the kids or gaming — then the immediate area surrounding the desk could be used for the home office deduction. Using the bed, couch or the kitchen table will not qualify at all.”

As for internet and electricity, you’re able to deduct a portion of your bills. “I allow [clients] to take up to 50 percent of the internet portion of their bill as a business expense depending on how much they actually work. If you buy a separate business-only internet line, then it can be deducted in total,” says Nisall. “Electricity should be left to the home office deduction (the ratio of the home office to entire home) since it is used throughout the home.” 

Know when to call in a professional.

Online programs like TurboTax can make doing your taxes easy, especially if you’re not self-employed or making lots of deductions. However, once you start making more money or taking on side hustles, it may be a good idea to start working with a pro. 

“The IRS wants to make sure that they’re getting what’s owed, and as you earn a lot of money, you’ve got more you can possibly pay [in], so they’re probably looking into your return more,” says licensed CPA Riley Adams. “If you’re doing straightforward stuff, you’re probably OK, but if you claim deductions, it’s worth talking to a professional.” A CPA will help you figure out what you can write off and how to make the most of every dollar, as well as advise you if you need to pay quarterly estimated taxes. 

Since COVID-19 means in-office visits are unlikely, you may need to visit with a tax pro virtually. To find one, ask a friend or family member who they use or reach out to peers in your industry to find CPAs who might specialize in specific areas relevant to you. Many tax pros (including my own!) have online portals for you to drop your documents and are totally OK with scanned docs or even iPhone photos of your 1099s and receipts.

Credit: Liz Calka

Keep things organized year-round to save yourself a springtime headache.

Tax time can mean lots of receipts, 1099s, and other important documents, especially if you’re entirely self-employed. One key to keeping your cool — and staying on your tax pro’s good side — is to stay as organized as possible. Just like you keep a dedicated space for your planner, pens, and Post-Its on your desk, think of your tax documents as an essential part of your day-to-day office work and you’ll save time and effort in the future.

To start, find a method of recording that works for you. “You don’t need to be using Quickbooks, you don’t need to be using Freshbooks. What you need to be using is something that will keep you engaged in your finances. When you’re engaged in your finances, you’re on top of them and you are organized,” Nisall shares. “For example, people who don’t understand how to use Quickbooks or aren’t very savvy about those types of programs aren’t going to be engaged, so they’re not going to keep on top of it.” If spreadsheets are your thing, create one for your tax info! “You’ll be more engaged and your numbers will be up to date.”

Tia Meyers, founder of Freelancing Females, adds tax prep to her calendar each week. “I set a weekly recurring calendar for 15 minutes each week to go through my Quickbooks invoices, payments, and receipts,” she says. “That way I’m not scrambling at the end of each year to remember who/when/where for all of my transactions.”

Adams agrees. “Save your receipts in a folder, whether it’s digital or physical. It’s easier to do as you go than to face the dread of going through everything [at tax time.]” There are also plenty of apps made specifically for the purposes of scanning receipts, including Shoeboxed and Expensify. If you get your bills via mail, snap a pic and record them right away, and if you go digital, set up a folder in your inbox or on your desktop and drag them over right when they arrive so you don’t forget.

Taxes aren’t a once-a-year thing if you work for yourself, so taking steps to make them an organic part of your routine is key. “Tax time is not just between the day the IRS opens the e-filing and April 15 – it’s all year round,” says Nisall. He recommends doing some pre-work and calculating your potential self-employment tax so you have a general idea of what to expect come tax time.

Get the essential pieces in place.

If what began as a side hustle has become a full-time career — especially over the past year — take the necessary steps to run your business efficiently year-round, not just during tax time. “Know exactly how your business is set up as an entity and the tax effects of that entity,” says Meagan Hernandez, a tax accountant and financial educator. “Use a fully functional accounting and bookkeeping system to keep track of all your business activity: income, expenses, paying yourself, loans — [that’s a] big one this year, with PPP and EIDL loans.” Hernandez also recommends opening a business bank account to keep your business and personal funds separate.

Know the rules from state to state.

Did you relocate or spend time working in another state in 2020? Make sure you’re aware of the tax laws in your new home or temporary residence, says Nisall, because tax requirements differ from state to state. “If your state has an income tax, you have to pay estimates. If you work and earn money in different states, you have to at least file a return in each of those states.” Learn the rules while you’re there or before you head out instead of at tax time to spare yourself surprise bills.