Are There Tax Benefits in Working from Home?

The answer to the question posed in the title here is mixed and depends entirely on the circumstances of your working from home. As millions of people were moved into remote work by their companies in the last few months to reduce exposure in the spread of the coronavirus, interest in this question peaked.

Unfortunately for most, if not all, of those folks, the answer as of 2018 is no, there is no opportunity for deductions for home office space.

According to Forbes, the Tax Cuts and Jobs Act of 2017, hailed as a financial boon for working Americans, eliminated those tax benefits for employees, which would include pretty much everyone sent home for virus avoidance.

That is true even for those who spent significant money to renovate spaces inside their homes to accommodate their new remote working situations. Given the scale of the transition to remote work and the fact some companies, including Facebook and Google, it’s possible Congress will opt to offer some kind of break for 2020 taxes and, potentially, beyond that.

What is an employee? “Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.” IRS Definition

Freelancer? You May Be in Luck!

That change in 2017 didn’t impact freelance and self-employed workers, including those who may provide services for an entity they don’t control but which does not dictate how they do their work.

For those folks, expenses considered “regular and necessary” for their work may be deductible under IRS rules.

Some of those who lost their jobs in the virus-triggered economic downturn may turn to freelance and contract work to replace the incomes they lost. Those folks may be able to deduct permanent improvements made to their homes that make it possible for them to work from home as provided under IRS Publication 587 (2018), Business Use of Your Home.

What is a self-employed person? “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” IRS Definition

For advice specific to your situation, you should talk to a tax advisor; this is not a substitute for the advice of a tax professional. If you’re interested in a home equity line of credit (HELOC) that could fund improvements to your home for setting up a workspace, contact our team at Journey Home Lending.