With millions of Americans working from home for the last several months, and maybe the foreseeable future, some may be tempted to take a home office tax deduction for the 2020 tax year.
But the vast majority of employees sent home to work remotely won’t qualify for the deduction.
“The home office deduction still exists, but very few people are able to use it. If you’re an employee, in most cases you will not be able to take a home office tax deduction. If you run your own business, the tax deduction is going to be available,” said D.C.-based tax attorney Raymond Quianzon.
The new federal income tax filing forms make that even clearer.
“The 2020 tax forms look different from the old forms. Schedule A, the deduction schedule, previously had several lines for job expenses. That is gone now. And Form 8829, the one for the home office deduction, clearly says at the top now it is limited to businesses,” Quianzon said.
The Tax Cuts and Jobs Act which took effect in 2018 suspended the home office deduction for W-2 employees until 2025, as well as most miscellaneous itemized deductions, including unreimbursed employee expenses.
Even for those who qualify for the deduction by running their own business out of their home, such as those who are self-employed or gig economy freelancers, it can be tricky.
The IRS states to qualify, the space must be exclusively used for conducting business and must be the filer’s principal place of business.
The home office deduction is based on either the square footage or the percentage of a home devoted to business use, so filers are required to calculate that.
For employees working remotely from home for their company, there is a better way to recoup work from home-related expenses than trying to deduct them.
“If you’re incurring expenses that really are for the benefit of your employer, ask your employer to reimburse you,” Quianzon said. “In turn, your employer will be able to take that deduction.”