Office at home for telecommuting employees The Tax Implications

I’m Sam Hicks, I’m a CPA and tax advisor and

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Thank you for tuning in. Today I’ll be discussing Office deductions for at home and telecommuting employees

If you're an employee who “telecommutes”—that is, you work at home, and communicate with your employer mainly by telephone, e-mail, fax, electronic data transfer, express mail services, etc.—you should know about the strict rules that govern whether you can deduct your home office expenses.

For 2018–2025 employee home office expenses aren't deductible. Employee business expense deductions (including the expenses an employee incurs to maintain a home office) are miscellaneous itemized deductions and are disallowed from 2018 through 2025.

After 2025 (and before 2018) employee office expenses are deductible, within limits. Starting in 2026, you may deduct your home office expenses if your home office is for the convenience of your employer (see below), and if you meet any of the three tests described further below: the separate structure test, the place for meeting patients, clients or customers test, or the principal place of business test.

If you do qualify, you may compute your home office deductions (described below) on a special worksheet. You report the expenses on Schedule A as below-the-line miscellaneous itemized deductions that are deductible only to the extent that they (together with all other miscellaneous itemized deductions) exceed 2% of your adjusted gross income.

Convenience of the employer requirement. The convenience of the employer requirement is satisfied if:

· you maintain your home office as a condition of employment—in other words, if your employer specifically requires you to maintain the home office and work there;

· your home office is necessary for the functioning of your employer's business; or

· your home office is necessary to allow you to perform your duties as an employee properly.

The convenience of the employer requirement means that you must maintain your home office for your employer's convenience, and not for your own. This requirement isn't satisfied if your use of a home office is merely “appropriate and helpful” in doing your job.

Under the above rules, if your employer requires you to telecommute, and doesn't make on-premises office space available for you, your maintenance of a home office for telecommuting will probably be treated as for the convenience of the employer. Otherwise, it's not clear whether your home office will be treated as satisfying this requirement. Therefore, if you can, you should get your employer to put in writing that it's a requirement of your job to work from an office in your home.

You should consult with experienced tax and legal professionals before making any decisions for your business.

Thank you for listening.

If you have any questions that you’d like discussed on a future episode please contact me at Sam@taximplicationspodcast.com.