Can I Claim Tax Deductions for Remote Work? (Part One)

Some people work remotely either as 1099 contractors or W-2 employees. Some self-employed individuals use part of their home as their office. Still, others work remotely due to pandemic restrictions. Can taxpayers claim tax deductions for remote work in each of these scenarios? Unfortunately, no. Edgewater CPA Group provides bookkeeping, tax preparation, and other financial services for individuals and businesses that share this question. For this reason, we review the subject in a two-part blog series.

Can I Claim Tax Deductions for Remote Work? Part 1

Home Office Tax Deductions Exclusive to Self-Employed

Before a law change in 2018, some employees were eligible for tax deductions for remote work. However, the deduction now only applies to self-employed individuals. Although this is unfortunate for those who have spent most of their time working from a home office, the law still applies. That being said, many people take part in the gig economy. In other words, people work multiple jobs that include a mixture of income, some of which qualify as self-employed. If this is you, you may qualify for the deductions. 

 

Here are some examples of people who may qualify for tax deductions for remote work:

  • Self-employed people who work full-time from a home office.
  • Full-time W-2 employees who do 1099 freelance work on the side.
  • People who receive compensation from multiple 1099 sources. 
  • People who worked as self-employed for a portion of the tax year.

Partial Deductions for Partial

Self-Employment

People who worked as self-employed for a portion of the tax year may be eligible for home office deductions. However, these typically occur as partial deductions prorated to the length of self-employment. For example, if you were self-employed for four months, you would prorate the full deduction to include only those four months. Basically, you would use the expenses incurred over that period to calculate the deduction.

Capture Self-Employed Income on

Schedule C

A Schedule C is an IRS form that captures profit or loss from business income. If your tax preparation includes this form and your home office meets the requirements, you should be able to claim the deductions. To qualify for the home office deduction, you must show some income on the form. This is a good rule of thumb to determine whether or not you qualify. Finally, income doesn’t mean profit. You can show a loss on Schedule C and still claim tax deductions for remote work.

What Constitutes a Home Office

One final note on home office deductions: you must exclusively use the space for your business. That doesn’t mean the office must be a standalone room. For example, you could have a dual-purpose room for exercise and a home office. However, the home office portion must be used exclusively for work, whether that’s bookkeeping, conference calls, scheduling, or any other number of business functions.

Once you understand what qualifies as self-employed and a home office, you can quantify deduction types and amounts. We’ll cover the latter in the next blog. In the meantime, self-employed Carmel, Westfield, Fishers, and Indianapolis residents can call Edgewater CPA with questions about taxes, payroll, and other financial questions at (317) 207-9269.