Working from Home During COVID-19

This year during the stay at home orders resulting from COVID-19, employees are working from home. In anticipation of some of the questions that will arise for 2020 tax return preparation, the IRS has provided taxpayers with a useful guide for the home office deduction in Tax Tip 2020-98. The first bullet point on this Tax Tip is probably the most important: “[e]mployees are not eligible to claim the home office deduction.” So while you are working from home, there may not be an additional tax deduction waiting for you at the end of the year.

Who is considered an an employee? Generally speaking, you are an employee if you receive a Form W-2 from your employer. The alternative situation would be a person who is treated as an independent contractor and receives a Form 1099-MISC which they report on Schedule C of their tax return. If you received a Form W-2 for the tax year 2019, then you will most likely still be considered an employee again in 2020. If you are unsure about whether you are considered an employee or an independent contractor, you can ask your employer or look at some of the additional information provided on the IRS website.

Some people may say that they took the home office deduction in a previous year even though they received a W-2 from their employer. They may be right that in a previous year they were able to include their home office on their Schedule A for Itemized Deductions. However, the Tax Cuts and Jobs Act of 2017 suspended the itemized deductions for unreimbursed employee expenses. The suspension of the unreimbursed employee expenses includes the suspension of the home office deduction for employees.

While there are still some states that allow a home office deduction for a Form W-2 employee, there is currently no home office deduction available on a federal tax return (IRS Form 1040) for W-2 employees who are working from home. Tax laws do change though, so Carbone Law, P.A., will continue to keep up to date on any new legislation.