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Working from Home – An IRS Deductible Expense?
By David Moss, Founder and CEO Thasis    Jun 08 2020
COVID-19 has demonstrated what a lot of companies never thought possible, the fact that they can effectively run their business by allowing employees to work from home (WFH).
I will not use this blog to review all the benefits fo the WFH initiatives. I do think, however, it is time to highlight an area that needs consideration: The cost to the employee for working from home and the lack of IRS support for these costs.
When you work from home your utilities rise. You spend more on electricity and water, and many people increase the speed of their internet. Add to that, one of the best ways to WFH effectively is to ensure you have a dedicated space to work from. This typically means you transform part of your home into an office losing personal space.
As an employee, prior to 2018, you were able to itemize deductions for unreimbursed business expenses, including the business use of part of your home. They needed to exceed 2% of your adjusted gross income and you filed on line 21 of your Schedule A. However, the Tax Cuts and Jobs Act eliminated the home office deduction for employees for the tax years 2018 through 2025.
If you are self-employed the IRS does however allow for these deductions. What further complicates the situation though is that many startup companies are completely virtual with a single self-employed owner. So, depending on the way the company is established, the owner may be considered self-employed and can take a deduction, but the employees still cannot.
Whether the IRS allows or does not allow you to take the deduction however, it seems that the advice from every accountant I have ever spoken too suggests not to declare any home office real estate.
I have worked from home for over 20 years, sometimes as an employee and others self-employed. In both cases, I never took the deduction with the fear of raising audit flags. I know many others that have treated the situation the same.
With the migration to a WFH environment picking up steam, it is time for the IRS to support this initiative and create a standard deduction for all employees that work from home and remove the stigma for claiming it as a deduction.

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