Recently, I’ve had several W-2 clients call with the same question: can I deduct my work-from-home expenses from my taxable income?
The COVID-19 pandemic has led many of us to work-from-home (WFH) in order to protect ourselves and our co-workers. That means we’re incurring expenses we wouldn’t normally pay in an office setting: electricity, internet, office supplies, computer upkeep, etc. And there’s no federal law requiring employers to reimburse these expenses.
Unfortunately, most W-2 employees cannot deduct WFH expenses beyond the standard deduction of $12,400 ($24,800 for joint filers). The Tax Cut and Jobs Act (TCJA) of 2017 eliminated unreimbursed employee expense deductions for all W-2 employees, except for a few protected groups.
Which Types of Workers Can Deduct Unreimbursed Expenses?
As we’ve covered before, independent contractors are taxed differently than W-2 employees. Since independent contractors are technically self-employed, their business expenses can be easily deducted on their Schedule C (Form 1040). Self employed workers can also take advantage of the Home Office Deduction.
It’s not so simple for W-2 employees. Only a few types of workers are eligible to deduct unreimbursed employee expenses. They are:
- Armed Forces reservists: Reserve members of any branch of the military can deduct unreimbursed expenses.
- Qualified performing artists: Musicians or actors can only deduct unreimbursed expenses if they have had at least two employers in a year, earned at least $200 per employer, and reported $16,000 or less in adjusted gross income. Earnings made in any other way cannot exceed 10% of their total income.
- Fee-basis state or local government officials: These cases are rare. Government employees paid by fees (such as Health Agents or Electrical Inspectors), even if only partially, can deduct their unreimbursed expenses. A salaried government employee likely wouldn’t qualify.
- Employees with impairment-related work expenses: Employees with physical or mental disabilities can deduct any expenses they incur to be able to work.
These types of W-2 employees will have to itemize their expenses if they want to receive more than the standard deduction. The total of your itemized expenses must exceed $12,400 for single filers, or $24,800 for joint filers. In all likelihood, very few people will meet all of these requirements.
If you’re a member of one of these qualified groups, make sure to file Form 2106 along with your tax returns to itemize your expenses.
Educators are a notable exception. Any K-12 teacher, counselor, tutor, principal, or aide can always deduct up to $250 in qualified unreimbursed expenses on their 1040 — no need to itemize.
Unfortunately, the rest of us can’t depend on tax deductions to cover WFH expenses.
Ask Your Employer to Reimburse WFH Expenses
By cutting the costs of maintaining a workspace, your employer is saving real money on the WFH arrangement. But a good employer shouldn’t force the burden of its expenses on its employees. They have the money. The best way to get the reimbursement you deserve is to ask.
Unfortunately, there’s no law that requires a business to reimburse WFH employee expenses. If you need help convincing your boss to cover your expenses, give us a call at 303-317-6111 — we’ll review your situation and go through your options.
Contact Boxelder Consulting
Boxelder Consulting’s full-service team of tax professionals, accountants, and bookkeepers can help you navigate any tax issue.
If you want to find out how you can maximize your deductions and minimize your tax exposure, don’t hesitate to reach out and schedule your free consultation. We look forward to meeting you!