Many businesses are offering remote work conditions in light of the COVID-19 pandemic. Remote work means that the employee is working away from the office, often from home, on a regular basis.
Before 2018, there were multiple home office expenses that you could claim on your taxes when working from home. In order to receive the highest amount of tax relief, employees would need to be aware of the work-related expenses that they could claim on their tax return, as well as what they needed in order to qualify for work from home tax relief.
Here’s what work from home employees prior to 2018 needed for tax relief when working from home:
Qualifying for Work from Home Tax Relief
The first requirement for the previous home tax relief is that employees were remote workers. To be categorized as a remote worker, you must have a legitimate work from a home agreement with your employer and you must be required to perform your work duties from home for the majority, if not all, of the time.
Employees who take work home from the office to complete over the weekend or at night are not eligible for home office deductions. Those who are self-employed or are independent contractors are not considered employees, and therefore some deductions and requirements are not applicable to them. However, they are eligible for many of the deductions that remote work employees are eligible for, and they may be required to keep similar records.
Self-employed taxpayers will need to pay self-employment taxes along with income tax if they make over $400 in a year. Understanding the tax deductions that they’re eligible for can help with their self-employed taxes.
What Home Office Expenses Could Employees Claim on their Income Tax Return?
People who work from home often have extra costs from their work-related expenses. These expenses tend to show up in their household bills, as an increase in heating, electricity, and internet. Some employers will contribute to these additional costs for employees who work remotely. However, instead of having your employer cover costs, you can make a claim for tax relief.
Here’s what you could claim on your tax return if you worked remotely before 2018:
Home Office Deductions
Those who work remotely from a home office may be able to deduct some of their costs from their taxes. If the remote worker tends to work mainly from their home office, they may be able to deduct mortgage interest, property taxes, and even some utility bills.
Travel Expenses
Remote workers who use their vehicles for work-related travel or who have to pay for hotels and meals out of pocket may be eligible for tax deductions. Keep in mind that if your employer reimburses you for any of these expenses, they cannot be claimed as deductions. However, if they reimburse you for just a portion of the expenses, the remainder can be deducted.
How Do I Keep Track of my Deductible Expenses?
If you work from home and will be claiming deductions on your tax return, you will need to keep careful track of your expenses throughout the year. It is recommended that remote employees keep a written record or logbook as a way to accurately document expenses. Along with keeping records, you should save any proof of payment documents for taxable expenses. This includes receipts, bank statements, and more.
Are There Limits to Deductions?
Work from home employees before 2018 would need to make sure and itemize their deductions in order to claim them on their tax returns. Non-itemized expenses could not be deducted. Also be aware that employee expenses were subject to a two percent floor, which means that only amounts greater than 2% of the adjusted gross income could be deducted.
Do I Qualify for Home Office Tax Deductions?
Since the COVID-19 pandemic, things have changed for remote work employees. Instead of itemizing and claiming deductions, congress has enacted COVID-19 related tax relief to help remote employees.
No longer can work from home employees claim itemized deductions for unreimbursed employee business expenses. Instead, the Tax Cuts and Jobs Act has suspended write-offs that make the employee’s home office expenses non-deductible.
For the time being, home office tax deductions are suspended and there is no tax relief for work from home employees. However, self-employed workers have the same tax rules as they did before the TCJA.
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