Are Pandemic-Related Home Expenses Tax Deductible?
The answer: It's complicated. Here's what you should know if a corner of your living room or bedroom is now also your office.
When the coronavirus forced workplaces to abruptly close indefinitely, employees had to quickly pivot to working from home. The shift brought built-in perks like a comfier dress code and four-legged coworkers. But don’t count on additional tax deductions for out-of-pocket work expenses, too, unless you’re self-employed.
Longtime rules changed under the Tax Cut and Jobs Act of 2017, which clarified distinctions between employees and self-employed individuals. “Employees are not self-employed and therefore can no longer deduct expenses related to work duties while working from home,” says Ines Zemelman, president and founder of Taxes for Expats.
And for most payrolled employees, any cost incurred from the virus-induced remote work environment is your responsibility. For complete clarity, refer to these two key questions:
Are you an employee?
If you are employed by the same company but working from home, no, the IRS won’t let you deduct printer ink or a second monitor. Also not up for discussion: whether the bedroom you’re using as a home office qualifies as a deduction. It doesn’t.
“Despite the significant number of Americans working from home in 2020, neither Congress nor the IRS has made it any easier to get a tax benefit for a home office,” says Charles H. Thomas III, a Certified Financial Planner and founder of Intrepid Eagle Finance.
Because the tax act scrapped these deductions, it’s up to you to invoice your employer for out-of-pocket expenses. While federal rules don’t require companies to reimburse pandemic-related expenses, certain state regulations do. These reimbursements could include face masks, hand sanitizer, cleaning supplies, delivery expenses, home office furniture, and supplies. Employers usually approve these on a case-by-case basis, so before you make a big purchase, make sure it’s a reimbursable expense. Here’s what else tax experts want you to know about the TCJA.
“For the most part, employees are at the mercy of their employer,” Zemelman says.
Are you self-employed?
For the self-employed, there’s far more tax-deduction certainty. Unlike those on payroll, self-employed workers can write off work-from-home expenses, as long as you’ve created a legit home office and aren’t just repurposing the dining room table.
If you’re new to self-employment, be sure to keep track of your rent or mortgage interest and real estate taxes, homeowner’s or renter’s insurance, and utilities. You can also deduct a portion of your costs of high-ticket business assets like computers, smartphones, printers, and furniture by claiming a depreciation deduction.
If you’ve been self-employed for years, you know to keep track of these things. Here are a few more often overlooked items to add to your receipts file: home modifications to accommodate medical or disability needs, such as wheelchair ramps and stairlifts, and professional uniforms required for a side hustle. Don’t forget these other tax deductions you can’t afford to miss.
Wondering about those masks and hand sanitizers? Paul T. Joseph, a Certified Public Accountant and the founder of Joseph & Joseph Tax & Payroll, says those expenses are all yours.
“Hand sanitizers and masks could be deductible as a medical expense or if you’re an essential worker and the items are necessary to protect yourself,” he says. “Home cleaning products probably do not qualify unless they become medically necessary.”
The most recent information on coronavirus tax relief is available on the IRS web site if you want to dig deeper.
Regardless of your tax status, here’s exactly what you need to be successful working from home.