Working remotely has its costs, such as high speed internet and office equipment, and it’s tempting to think of these as potential tax write-offs.
Unfortunately for most employees, or anyone who receives a W-2 form, the 2017 tax law eliminated the federal write-offs previously allowed for unreimbursed business expenses and home offices, along with most other miscellaneous itemized deductions. The thinking was that a doubling of the standard deduction would help offset the pain of ending or capping itemized deductions, but that was before the coronavirus.
Given the tax limitations, the best way for employees to recover what they’ve had to spend to work remotely may be to negotiate with their employers. The federal tax code lets employers reimburse employees for costs that are reasonable and necessary for them to do their jobs amid a disaster, and the IRS has said the pandemic qualifies. While the IRS doesn't provide a list of acceptable expenses, reasonable interpretations include home-office costs.
Employees don't have to count the payments as income and employers can deduct them as business expenses. There are a few caveats though, including that the payments have to be in addition to an employee's normal salary or wages.
There's better news for those who are self-employed: They're still allowed to take deductions for home offices and related business expenses. Even individuals who were self-employed and previously rented office space elsewhere but are now working from home will be able to take advantage of the home office tax break, which lets them deduct a percentage of some home expenses.
But taxpayers have to be cautious about taking the write-off. There must be a designated section of their home that's used exclusively and regularly for work (a dining room table doesn’t count).