It’s a weird tax year.
The filing deadline for 2019 is in mid-July, many workers have been eking out a professional existence from their kitchen tables for months, and school and childcare seem like distant memories.
It’s also led to a lot of tax questions: Can I write off my rent or mortgage if I’m working from home? What about that ergonomically correct chair I just bought to save my back?
We consulted Nathan Rigney, lead tax research analyst at H&R Block’s Tax Institute, to get to the bottom of some queries that have come up during this very odd year.
Can I write off my rent?
The short answer? If you are a W-2 employee, then no. And it’s confusing, notes Rigney, because prior to 2017 if wide swaths of America were working from home, we would have been able to write off such expenses. But the Tax Cuts and Jobs Act of 2017 specified that employees would no longer be able to write off unreimbursable expenses. “It’s really unfortunate,” says Rigney. “Had this happened a few years ago we would all be deducting our home office and utilities and lots of other expenses.”
Can independent contractors or small-business owners write off expenses?
That said, if you are an independent contractor paid via a 1099 or a small-business owner, you may be in luck. You’ll need to show that you use your workspace “exclusively and regularly” for work alone, but Rigney says that doesn’t need to be a separate room. It could be a corner or a desk, for example. It must also be your “principal” place of business: If you are prevented from working in your office because of stay-at-home orders, that will qualify. “A lot of folks are meeting that test now,” says Rigney.
If you meet the standards, you’ll be able to write off all your direct expenses (office furniture, equipment, computers, etc.) and a proportion of your indirect expenses (rent, mortgage interest, utilities, homeowners insurance, etc.) Let’s say you calculate your workspace represents 5% of your house, then you’ll be able to write off 5% of those indirect expenses.
That’s a good deal of record keeping, so Rigney also suggests some taxpayers may prefer to take advantage of the “simplified method,” which allows you to take a deduction of $5 per square foot on up to 300 feet of office space.
Will I get audited if I write off working from home expenses?
There’s long been a fear that trying to write off a home workspace in any form will trigger an audit. But Rigney suggests that may have had more to do with the pre-2017 standard and the unreimbursed employee expenses worksheet. Now, he says, “I won’t be surprised if audit rates go down a bit in this area.” But like all tax professionals he urges people claiming this deduction to keep meticulous records.
But I’m a W-2 employee and I really need a new chair, monitor, or standing desk to work from home. Isn’t there any deduction I can take?
You can’t take the deduction, but there could be a solution. “A business owner can deduct items purchased for employees if those items are ‘ordinary and necessary’ for business operations,” says Rigney. That includes equipment to kit out your home office, bigger monitors, better chairs, or anything else that helps employees work comfortably from home. So talk to your employer to see whether it might be willing to reimburse you for the item you need.
What if I live in one state and pay taxes in another?
One final bit of weirdness this year, says Rigney, is that there are lots of people like himself who work in one state, but live in another (he does a Kansas–Missouri commute normally). So you’ll need to check to see if your state(s) have altered any rules or created “safe harbor” provisions for taxpayers who normally commute but have been working from home lately. He points to Georgia as one state that has done this recently.
All in all, says Rigney, it’s just “going to add a little bit of complexity”—something anyone working from home should be pretty used to by now.
