Need to estimate your home office expenses for tax purposes? Are you drafting a work-from-home stipend proposal for your employer? Whatever your reason for tracking your work-from-home expenses, you need a system that is clear, accurate, and transparent. Use these tips and guidelines to estimate your work from home expenses with ease!
Can I Write Off Work-From-Home Expenses on My Taxes?
Before we dive into tips and tricks on totaling your work-from-home expenses, you may be wondering if tax write-offs apply to you. As more and more folks shift to working from home part-time or permanently, this question comes up often: can you write off work from home expenses on your taxes as an employee? Here’s what TurboTax says if you’re an employee and not a business owner:
“If you’re an employee working remotely rather than an employer or business owner, you unfortunately don’t qualify for the home office tax deduction (however, please note that it is still available to some as a state tax deduction). Prior to the Tax Cuts and Job Acts (TCJA) tax reform passed in 2017, employees could deduct unreimbursed employee business expenses, which included the home office deduction. However, for tax years 2018 through 2025, the itemized deduction for employee business expenses has been eliminated.”
Even if you’re ineligible to file a tax deduction, you may be able to get a work from home reimbursement from your employer. Some employers offer work from home office stipends to account for the increase in personal costs while working from home.
Step One: Calculate Work From Home Utility Expenses
To understand how to calculate your work from home utility expenses, subdivide your living expenses versus office expenses. Sounds tricky, right? It’s not as intimidating as it sounds. Here are a couple of ways to do it.
First, consider how much of your living space is dedicated to working. Measure the overall square footage of the house or apartment, then measure the space you use for work. To calculate your totals, tally your electricity, heating, internet, and water bills for each month of WFH. Then, multiply the number of days in the month by the total square footage of your space. Separately, multiply the number of working days in the month by the total square footage of your workspace. Divide your total bills by the first total space, total month number. Then, multiply that by the second total workspace, total workdays number. That’s how much of your utilities have been work expenses. Since utilities are often variable based on use, make sure to calculate these totals for each month to ensure your taxes or stipend proposals are perfectly filed.
Here’s an example: if you live in a home that’s 1,000 square feet, your workspace is 200 square feet, and your total monthly utilities are $450, your calculations would look like this:
31 days in a month x 1,000 square feet = 31,000
23 workdays in a month x 200 square feet = 4,600
$450 total utilities / 31,000 = 0.0145
0.0145 x 4,600 = $66.77 business-related utilities per month
There’s a second, simpler way to calculate your totals. For 2020 tax filings, the IRS has a simplified option for home office deductions that has a prescribed rate of $5 per square foot with a maximum of 300 square feet. So, take the total square footage of your dedicated workspace and multiply it by $5.
If you live in a home that’s 1,000 square feet, and your workspace is 200 square feet, your calculations would look like this:
200 x $5 = $1,000 total deduction
Step Two: Consider Your Office Furnishings
Have you purchased a desk? What about office lamps? Desk chairs? Whether you’ve purchased new or used furniture for your home office, all of those items may be tax-deductible if you’re a business owner. If you don’t own a business, these expenses may be possible reimbursements from your employer through a work-from-home stipend.
Step Three: Add Up Your Invisible Costs
Have you downloaded or purchased new software for your home office? Did you need to switch from dial-up to wireless or fiber internet? How have your electricity bills fluctuated since you began working from home? All of these are invisible but measurable costs that can be added to your WFH expenses.
Shop CORT Furniture Outlet and Upgrade Your Home Office
Are you still working on making your home office feel like a productive hub? Let us help! Make working from home feel like being in the office with these tried and true tips. Make your space twice as efficient by following this guide to converting a bedroom into a home office during your work hours.
If you’re planning on getting a tax return this year or your employer provides a work-from-home stipend, invest in your productivity! Shop CORT Furniture Outlet online or at your nearest clearance center for previously-rented, high-quality home office essentials like desks, ergonomic chairs, bookshelves, and more. Our extensive inventory of new and previously used office furniture allows you to buy quality furniture at a discounted price. Here’s how it works: browse and purchase furniture online. At checkout, you can opt to have your furniture delivered or you can pick it up — same day! Unlike big-box retailers, you don’t have to wait weeks for furniture to arrive. It’s available and ready for you the day you purchase it.
Working from home can be incredibly productive, as long as you have the right set-up to do your job efficiently. Don’t let a lackluster work-from-home setup distract you from getting the job done!
*This post is purely informational. Please consult a tax professional for financial advice.