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Have you incurred home office expenses due to the pandemic?

| Sep 22, 2020 | Tax Controversies |

If you used to work at a company location but are now working from home, that could have tax consequences. There are a couple of situations to consider.

You may have incurred some home office expenses that your company did not reimburse. Or, you may have received reimbursements for work-related expenses from your company.

Unreimbursed expenses

Before the Tax Cuts and Jobs Act (TCJA), employee business expenses that went unreimbursed were deductible by those who itemized. They were to be included on Schedule A of the 1040. After the TCJA, unreimbursed employee business expenses are not deductible any longer.

However, if you are self-employed, you can still deduct home office expenses on Schedule C and supporting schedules.

You can deduct home office expenses as a self-employed person if you regularly and exclusively use part of your home as a home office. It must be your principal place of business. This generally means that you can conduct some business at other locations but also use your home substantially and regularly to conduct business.

If you have a separate, free-standing structure on your premises that you use exclusively and regularly for your business, it need not be your principal place of business to qualify for the deduction.

If you are interested in claiming part of your home as your principal place of business, discuss any concerns with your tax attorney. There are two methods for calculating the deduction.

What about reimbursed expenses?

If your employer reimbursed some of your expenses related to working from home, the reimbursement income is not taxable to you, as long as there was adequate documentation.

It’s important to know that New York and several other jurisdictions have enacted legislation requiring employers to reimburse their employees for whatever expenses are necessary to adjust to working from home. The challenge may be to determine how much was actually spent and how much the IRS would consider necessary.