What tax deductions can you take if you work at home? Experts explain
SAN MATEO, Calif. (KGO) -- If you're fortunate enough to be working at home during the coronavirus pandemic, you may be wondering if you can take a tax deduction for extra expenses. The answer depends on your circumstances.
Let's say your office shut down during the pandemic. So now you're working at home.
You buy a desk, a chair, maybe even a computer. Are those extra expenses deductible?
RELATED: What you need to know about tax season
What about the extra costs in utilities such as heat, electricity and water because you're spending more time at home? Is that deductible on your federal tax return?
The answer is, no.
"Whether or not you can take them, it doesn't really matter. There's no place you can deduct them. So if you're an employee, you're out of luck," said Norm Golden, a tax expert and enrolled agent.
He says the 2017 tax reform measure signed by President Trump did away with itemized tax deductions.
CA UNEMPLOYMENT: Thousands of fraud victims get income tax bill for jobless benefits paid to scammers
Now what happens if you turn in receipts to your company and you get reimbursed? About one out of three companies are doing that.
Is the reimbursement taxable as wages?
You'll be happy to know the answer is also "no."
"It's not going to be included in your W2 and you don't get a deduction," he said.
But what if your employer gives you a monthly stipend of $100 a month towards your expenses?
Unfortunately, that answer is "yes."
RELATED: Tax filing season delayed, will start February 12: IRS
"Then yeah, that $100 a month is going to be in your W-2," Golden said. That means you'll pay taxes on it.
There is some good news. Many of these deductions can be taken on your state income tax return -- perhaps even your home office.
If your office is used exclusively for work and doesn't have a dual purpose, it's deductible on your California tax return.
"Let's say you have a 1,000 square foot apartment and you have a 10 by 10 room? That's 100 square feet over 1,000, is 10 percent. So you take 10% of your cost," Golden explained.
That's true whether you rent or own a home.
RELATED: IRS issues warning about 'ghost tax return preparers'
But if you're working in your living room, that room is not deductible because it's not exclusively an office and thus isn't deductible even on your state taxes.
"I'm sorry. It may not be fair but they don't use fair and tax law in the same sentence," he said.
Extra expenses such as utilities are only deductible on your state taxes if your home office is used exclusively as an office. If you're an independent contractor, those deductions are also available for your federal tax return.
Take a look at more stories and videos by Michael Finney and 7 On Your Side.
Have a question for Michael and the 7 On Your Side team? Fill out the form HERE! 7OYS's consumer hotline is a free consumer mediation service for those in the San Francisco Bay Area. We assist individuals with consumer-related issues; we cannot assist on cases between businesses, or cases involving family law, criminal matters, landlord/tenant disputes, labor issues, or medical issues. Please review our FAQ here. As a part of our process in assisting you, it is necessary that we contact the company / agency you are writing about. If you do not wish us to contact them, please let us know right away, as it will affect our ability to work on your case. Due to the high volume of emails we receive, please allow 3-5 business days for a response.
