When it comes to dealing with COVID-19, taxes may be the last thing on your mind—but with millions of people now working from home, many are wondering if they’ll be able to deduct those expenses on their taxes next year.
As it turns out, there is a deduction—but you have to qualify.
You’ve set yourself up in a nice little area to work from home as the Covid-19 pandemic wears on and you’re now wondering—what about the cost of internet, electricity and other expenses associated with this home office?
CPA Robert Davis says when the tax laws changed in 2018—the deductions for home offices changed too.
“If you are receiving W-2 wages there is nothing you can deduct,” he said. “There are no deductions for that.”
In other words, if your company is paying you a salary, the home office isn’t gonna help you get money back on your taxes.
But, if you are self-employed and your home office area is exclusively for business—you’re in luck.
“You can deduct anything associated with the office computer, paper & supplies,” said Davis. “You can deduct utilities, homeowners insurance and mortgage interest based on the square footage of the home office divided by the total square footage of the home.”
But, if you’re a Covid-19 office refugee— you have to be prepared for the government to make amendments to the current tax rules about working remotely.
Here’s what CPA Davis told me you should do.
“It is possible if this extends for a long period of time there could be changes,” he explained. “You need to keep records associated with that in case the tax laws change—or they change their mind on that.”
For the government, there is a distinction between simply working from home and running a business from home.
Also, some companies are going to reimburse employees for things like work related phone calls —internet usage etc.
Even so, keep spending records anyway because you never know when they’ll come in handy.