Tax Tips for Employees Working from Home

Working from home is becoming more common, but the tax rules have not kept up with this change. Since the tax reform in 2018, most employees are not allowed to deduct work expenses that are not reimbursed by their company.

This includes the home office deduction.
 

Who Can Get Home Office Tax Benefits?

Now, these tax breaks mostly help people who are self-employed. If you earn money from both a regular job (shown on a W-2 form) and your own business, you can only claim deductions that are directly related to your self-employed work—not your employee work.

Any space or expense you write off for taxes must clearly support your business activities, not your duties as an employee.
 

What Counts as a Home Office?

According to the IRS, to claim a home office deduction, the space must be used regularly and only for your self-employed business. It can be:
 

• Your main place of business
• A spot where you meet clients
• A space where you store inventory
• A separate building on your property might also qualify, even if you do some work somewhere else.

If you share services like your phone or internet between personal use, your job, and your own business, you can split the costs. But any area you claim as a home office cannot be used for your employee job.

If you only earn employee income, you cannot claim the home office deduction.
 

What Can Self-Employed People Deduct?

People who are self-employed can deduct part of major home expenses, such as:
 

1. Mortgage interest
2. Utilities
3. Insurance
4. Property taxes

If you run a daycare from home, some special rules apply, and you don’t have to follow the exclusive use rule for the space you use.
 

How to Claim the Deduction

Miguel Burgos explains: “To claim the home office deduction, you must use part of your home only for your business. But you do not need to do this if the area is used to store inventory or as a daycare.”

There are two ways to claim this deduction:
 

• Simplified Method: You can get a deduction of $5 for every square foot of your home office, up to $1,500 per year.
• Direct Method: You figure out what percentage of your home is used for business and deduct that portion of your expenses.

You can choose which method to use each year—go with the one that saves you more money.
 

Important Thing to Remember

If you use the same space for both your regular job and your business, you can’t claim a home office deduction. In this case, it may be better to ask your employer to reimburse you for work expenses since these payments are usually tax-free.

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