If you have spent the majority of this year working remotely, you likely have invested in making your work from home space more, well, workable. Maybe you purchased a new desk or laptop or upgraded your internet connection. With 2020 nearing its end, your thoughts may have wandered to whether you would be allowed to take the home office tax deduction for these expenses on your 2020 federal tax return.
If you receive a paycheck or W-2 from an employer, you do not qualify, even if you are working remotely. Before the Tax Cuts and Jobs Act in 2017, employees who itemized deductions could include unreimbursed work expenses (such as work from home equipment) but only if they exceeded 2% of their adjusted gross income and only for the amount over 2%. However, as 2017 tax law eliminated this option, your best and only recourse as an employee is to ask your employer whether they will reimburse you for work-from-home related expenses.
If you are self-employed, meaning you run your own business from your home or are an independent contractor or freelancer working from home, you may be eligible to claim the home office tax deduction. However, you can only deduct expenses for the portion of your home used “exclusively and regularly” for business, your home must be the primary place of business, and you cannot deduct expenses related to anything used for both your work and home life. If you qualify, you can deduct mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent, though you must meet specific requirements to claim home expenses as a deduction and the deductible amount may be limited.
If you have any questions about whether you qualify for the deduction or would like any advice, please do not hesitate to contact me; I’d be happy to help.