Does Working from Home Change Your Tax Situation? We Asked the Experts

published May 13, 2020
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Credit: Lauren Kolyn

For those thrust into work-from-home routines, kitchen tables are now doubling as work desks, living rooms are makeshift conference rooms for Zoom calls and, ultimately, work-life balance is blurry. So, in the search for a silver lining, you might concede: “Well, at least I can write off a home office on my taxes.” 

Unfortunately, you’re going to need to file this under “Things that are not fair in 2020.” Unless you’re self-employed, you don’t qualify for home office deductions—not even if your regular office is shut down to non-essential workers during the coronavirus pandemic, forcing you to work from home. If you quickly converted a spare room into a bonafide office and spent money on an ergonomic chair and other office furnishings, it still doesn’t count.

“Sadly, since tax reform, the home office deduction is now only available to those who are self-employed,” says Riley Adams, a licensed CPA in Louisiana and a senior financial analyst for Google who runs the personal finance site Young and the Invested.

Tax reform that was passed in 2017 and went into effect in 2018 no longer allows employees to deduct unreimbursed employee business expenses, which includes the home office deduction. 

However, if you’re a W-2 employee, look into whether your employer will reimburse you for a portion or all of your home office expenses, suggests Christina Taylor, head of operations at Credit Karma Tax

“Check your employer’s handbook and policies to see if there is an allowance for home office expenses or other work from home expenses you may be incurring,” she recommends.

If you’re thinking about starting a side gig, you can set up a home office for that business and claim the home office deduction if you qualify, Taylor says, even if you are a W-2 employee at your day job. 

“Just use the space you set aside ‘regularly and exclusively’ for your side gig and you can qualify for the home office deduction on your 2020 taxes that are filed in 2021,” she says.

If you are self-employed and use part of your home regularly and exclusively for business-related activity, the IRS lets you write off associated expenses no matter if you’re a renter or homeowner. That means you can’t claim a spare room that doubles as an office and a home gym, nor could you write off your kitchen table, explains Beth Logan, with Kozlog Tax Advisers in Massachusetts. But if you’re self-employed and have an office or even a desk that is exclusively for business (make sure nothing is in the drawers but items related to your business) that you regularly work form, then you can claim that space. 

If you plan to take the home office deduction as a self-employed individual, you can do so in one of two ways, explains Taylor. 

The Simplified Method: This allows you to multiply $5 per square foot of home office space up to 300 square feet, or $1,500. 

The Regular Method: You take a percentage of your home as a deduction, based on the costs of maintaining your home, like mortgage interest and utilities.

To see which method is more advantageous, you or your tax professional will need to calculate both methods, Adams suggests. 

So, while you may not get the at-home office deduction now that you’re WFH, at least you get to wear pajama pants, right?