CORONAVIRUS

IRS Tax Payment: how does the tax deduction work for home workers?

If your work is remote and you are self-employed you can get a tax deduction but there is some good news for those employed by a company and working remote too.

IRS Tax Payment: how does the tax deduction work for home workers?
KEVIN LAMARQUE REUTERS

The coronavirus pandemic has led to a lot of companies switching to remote work whether they wanted to or not. If you run your own business you can claim back tax for office supplies but there are some caveats to that law like having to use a room specifically for office-related work.

The US economy had been hit particularly hard by the coronavirus and even though the unemployment rate is currently just north of 11%, some experts say it is even higher than that. Millions of Americans have had hours reduced or completely eliminated and even more have been operating from kitchens, spare bedrooms and sitting rooms across the country.

When the US government brought in the Tax Cuts and Jobs Act in 2018, it eliminated all deductions for employee job expenses and that means home offices do not count as deductible unless you are self-employed.

"One of the principal requirements of the home office deduction is the space you use for business must be regularly and exclusive used for business,” an accountant told Business Insider.

The problem, Savage, says is that if you use your apartment or house for personal and business use then it will not count towards the tax deduction as outlined in the Tax Cuts and Jobs Act.

Nathan Rigney, the lead tax research analyst at H&R Block, says you should keep all receipts though as some states might let you deduct the expenses you incur for home office even if you are not self-employed.

“Folks who are disappointed they won’t get a federal tax benefit should go ahead and keep records, including receipts of the expenses incurred,” said Rigney.

Alabama, Arkansas, California, Hawaii, Minnesota, New York and Pennsylvania all provide a deduction for unreimbursed employee business expenses but it depends on the state as to what is considered the standard deduction. If, for example, you work in California, Pennsylvania, Illinois, Montana, Iowa and New Hampshire then your company is required by law to repay your business expenses.

So, if you are working from home and are self-employed, you are entitled to a tax deduction. If you are not, ordinarily, you would not be allowed to claim any tax back for computer screens, internet usage and office supplies but some states have altered the rules and might allow a deduction for itemised office supplies.