Tax Tips for Employees Who Work at Home – TurboTax Tax Tips & Videos

overview Since the 2018 tax reform, at-home expense deductions for employees have been reduced but remain for freelance professionals. asian man working on his laptop with a dog

Key Takeaways

• Employees who work from home can nobelium longer claim tax deductions for their unreimbursed employee expenses or home position costs on their federal tax return .
• Prior to the 2018 tax reform, employees could claim these expenses as an enumerate deduction .
• freelance workers can claim eligible deductions for business expenses and for working out of a home office .
• You can choose between two methods for calculating your business use of base tax deductions, the simplified and send methods .

Can you claim work from home tax deductions?

If you ’ re an employee, you can claim certain job-related expenses as a tax deduction, but only for tax years prior to 2018. For tax year 2018 and on, unreimbursed employee expenses and home position tax deductions are typically nobelium longer available to employees .
The issue of employees working from home has grown well due to the COVID-19 pandemic. Just a few years ago, these employees may have been eligible for tax deductions that were unavailable to in-office employees. immediately, with only a few exceptions, entirely freelance people are eligible to claim tax deductions when working from home .
Before you claim these deductions, be surely you meet the IRS ’ criteria, or you could face extra taxes or penalties .

Who can claim 2021 tax deductions when working from home?

Since tax reform became law in 2018, by and large alone freelance people can claim tax deductions when working from base. Working as an employee and for yourself doesn ’ t inevitably disqualify you from taking these tax deductions. The deductions have to be related to your freelance income rather than your employee work .
even in this situation, you ’ ll broadly need to make sure your home agency is merely in support of your self-employment and not your job as an employee. For other expenses such as call and Internet, you can split these between working for yourself, as an employee or as a personal expense. For deducting home office space, the IRS requires these expenses to be used entirely for your self-employment sour to be deductible .
To understand more about how you can claim tax deductions when working from home, take a look at the follow tax tips for employees .

Tax Tip 1: Only deduct home office expenses if you only worked for yourself or in addition to a W-2 job.

many employees work from dwelling because it ‘s convenient for their employer. For case, a salesperson who lives in a different state than company headquarters, may work from home rather than the company paying for function space .
If you only worked as an employee during the tax year, you ca n’t typically claim home agency expenses related to your work. If, however, you worked for yourself in some capacity, you might be able to deduct home function expenses .
If your home agency is used entirely and regularly for your self-employment, you may be able to deduct a dowry of your home-related expenses, such as mortgage interest, property taxes, homeowners insurance, and utilities .
Remember, you typically can merely claim these deductions if you are freelance including if you also worked as a W-2 employee. Further, the home function deduction must be entirely and regularly used for your self-employment activities .

Tax Tip 2: Keep thorough records and save receipts.

You need to keep accurate records of any expenses you claim as a discount. The IRS recommends keeping a written record or log book in the event any questions arise about your deductions .
You should besides save proof of payment for any tax-related expenditures. This proof may be in the form of a credit poster or savings bank statement, canceled check, or itemize receipt. If you paid in cash, the reception should include the payee ‘s name, the date of the requital, and the amount. Digital records will normally satisfy this prerequisite equally long as you can retrieve them when needed .

TurboTax Tip: Keep copies of all tax-related items and documents for at least three years. This includes receipts, invoices, tax forms, and any other supporting documentation .

Tax Tip 3: Consider the simplified home office deduction to ease your record keeping

If you have a home office used as a space single to your work as a freelance person, you ‘re typically entitled to claim the home position tax tax write-off on your tax return.

To claim a home agency as a business expense, you must use separate of your home or a disjoined structure on your property as a primary invest of occupation. This includes uses such as greeting clients or customers, conducting business, storing stock, using it as a day-care facility, or some other work-related purpose .
When eligible to claim the home office deduction on your taxes, you have two ways of claiming the deduction : the simplified method and the address method .
The simplified method acting is merely that : simple. You can use this method to determine your home office tax write-off on your refund by expensing $ 5 per square metrical foot of your office, up to 300 square feet or $ 1,500. The early option, the directly method acting, is more involve but could result in a bigger deduction .

Tax Tip 4: Consider taking the direct method if it provides a bigger deduction.

The early way to claim the home position deduction is by using the direct method. This involves tracking all of your home office expenses in addition to any costs related to repairing and maintaining the space. Further, you can claim deductions for a assign of other expenses based on the proportion of the space to the rest of your residence .
For exercise, if your home position represents 10 % of your residence ’ south sum hearty footage, you can claim astir to 10 % of your housing costs, such as utilities, mortgage matter to or rent, and policy .
Depending on the proportion of your home office ’ second square footage to your full home ’ sulfur square footage and your housing expense, your tax write-off will likely vary depending on what method acting you use .
When using the aim method acting, you besides need to account for depreciation of a helping of the house if you own it. You do n’t need to worry about calculating this when using the simplify method for taking the home position tax discount .

Tax Tip 5: Each year you can switch between the simplified and direct method to take the biggest tax deduction.

To get the biggest deduction possible, you may need to calculate your tax write-off using both the direct and simplified methods to see which one comes out ahead for your taxes .
You don ’ t need any reason to switch from one method acting to the other year-to-year. Each class you can choose the method acting that yields the highest tax tax write-off .

How do you calculate the home office deduction as a self-employed person?

Calculating the home office tax write-off under the simplify method is square. You take the square footage of your home agency used entirely for your freelance business and multiply it by $ 5 per square foot up to a maximum of $ 1,500 per class .
The lead method acting, by comparison, requires more work on your partially throughout the year and when preparing your rejoinder. But, it may besides save you more on your taxes .
The conduct method determines the home office tax tax write-off based on the share of your home agency square footage to your stallion home .
Divide the square footage of your home office by the square footage of your integral living quad to calculate the percentage of your home that is dedicated to your home agency. This percentage is then applied to your home expenses to determine what sum might be a business expense .
You can claim a percentage of expenses such as rent, mortgage sake, utilities, policy, and repairs. disparagement is besides an allowable expense for a home that you own .
For model, if your office is 250 squarely feet and your dwelling is 1,000 squarely feet, you ‘d deduct 25 % of your permissible expenses ( 250/1,000 = 0.25 ). If you had $ 10,000 in eligible home-related expenses, you could claim up to $ 2,500 in deductions .
The lineal method acting has no maximum subtraction limit, making it more attractive in some instances than the simplify method acting. You may consider calculating both methods to help determine which method acting is best for your situation .

Can I use the same space for my W-2 job and side gig and still claim the deduction?

If you use your home office for your W-2 speculate and your side gigs, you won ’ t be able to claim your home position as a tax deduction .
The IRS allows you to deduct expenses for having a dedicate distance where you regularly and entirely conduct your freelance commercial enterprise. This is true whether you live in a house, apartment, condominium, mobile home or boat, equally well as external structures like a barn, garage or workshop .
If you besides use the quad to work as a W-2 employee, the IRS doesn ’ deoxythymidine monophosphate allow you to claim a discount for this work outer space on your tax refund since it is n’t used entirely for your self-employment .
If you have separate spaces for your employee subcontract and for your self-employment work, then the eligible expenses for your self-employment space can calm be deductible even though the expenses for your employee space is n’t.

tax reform changed the handiness of deductions for employees who work from home. now, you can merely claim your freelance expenses .

The best of both work worlds:

One option for employees who must pay for business expenses related to working at home, is to seek reimbursement from your employer. Reimbursements are typically tax-exempt arsenic retentive as your employer has an accountable plan. This means they require you to submit an expense report or some other means of accounting for your expenses. Being reimbursed for an expense is about constantly better than taking a deduction for the same expense on your taxes .
Remember, with TurboTax, we ‘ll ask you elementary questions about your biography and help you fill out all the right tax forms. With TurboTax you can be convinced your taxes are done right, from simpleton to building complex tax returns, no matter what your site .

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