How to Claim Work-From-Home Tax Deductions Since most W-2 employees get a lower tax bill by taking the standard deduction instead of itemizing, you’re probably just going to be out of luck if you want to claim expenses. To claim expenses, you’ll need to itemize deductions. Reaching the threshold for expenses doesn’t sound super difficult, but the second hoop is the real deal breaker. 2 So if your income is $50,000, your threshold to begin claiming expenses is $1,000. Got small business tax questions? RamseyTrusted tax pros are an extension of your business.įirst, the IRS only allows you to deduct expenses above 2% of your adjusted gross income. (Yep, Uncle Sam loves to have you jump through hoops.) If you fall into any of those groups, you’ll still need to jump through a couple of hoops before you actually get a deduction. There are exceptions to every rule, right? So the small (and very specific) group of W-2 employees who can claim work-from-home tax deductions are Armed Forces reservists, certain performing artists, state or local government officials who are paid on a fee basis, people with physical or mental disabilities, and teachers. That mean you can deduct 10% of your utility bills (electricity, water and gas), mortgage payment or rent, property taxes, mortgage interest, homeowners insurance, repairs, and maintenance. Say your home office occupies 10% of your house. To take this deduction, you’ll need to figure out the percentage of your home used for business. One of the bigger tax deductions you can take if you work from home as an independent contractor is the home office deduction. Here are 16 self-employment tax deductions to help you save money! The best way to lower your tax bill is by claiming tax deductions. That includes the self-employment tax, which is the full 15.3% of Social Security and Medicare taxes (an employer normally pays half of these taxes). And since you don’t have an employer withholding taxes from your paycheck, it’s up to you to manage them yourself. When you’re self-employed you often end up wearing lots of hats-accountant, HR rep, janitor. A 1099 lists income you earned as an independent contractor so you can report it on your taxes. If you’re self-employed, you’ll probably end up receiving one or more 1099-NEC tax forms from the companies you worked for. A few very specific types of W-2 employees can still take the home office tax deduction, but we’ll talk about that in a minute. The IRS used to allow W-2 employees to deduct expenses related to working from home, but Congress changed that with its 2017 tax reform bill. In other words, if you work full time as a freelancer or have a side hustle that requires an office, you qualify to deduct a portion of your home’s expenses. So who gets to take work-from-home tax deductions? Well, the IRS reserves them for self-employed independent contractors. (But grab some string cheese from the fridge next to your desk, and you’ll feel better before you know it.) Unfortunately, if you’re a salaried or hourly employee (the kind who receives a W-2 during tax season), you can’t take tax deductions for your home office. And maybe you’ve continued working remotely some or all of the time. If your employer instituted work-from-home policies during the pandemic, you probably spent some time and money setting up a home office (the kitchen table just wasn’t going to cut it for a desk). So let’s dig into the deets on work-from-home deductions.Ĭan I claim the home office tax deduction if I've been working remotely? And pajamas are the new business casual wear.īut does working remotely have any tax advantages? What are work-from-home tax deductions or write-offs? We want you to get every deduction you deserve-so you’ll have more cash in your pocket to get out of debt, save for an emergency fund, and win with money.

You can make the 20-step commute from your bedroom to your office in a little under four seconds.

Tax deduction work from home