October 2021

​​What Expenses Are Deductible When You Work From Home?

​​What Expenses Are Deductible When You Work From Home?

 

Many people who work full time in an office dream of working from home. Working from home has been associated with being flexible and relaxing compared to physically going to the office. Unfortunately, since the pandemic, the dream turned into a reality for almost 43% of the workforce in the United States. Consequently, employees need to understand some of the expenses that are deductible when they work from home. Below are some of the costs that are deductible when you work from home. 

 

  1. Rent or mortgage payments

This is one of the expenses that are deductible when you are working from home. Remote workers can claim a home office deduction instead of itemizing each expense. However, you need to be sure that the office is used solely for business purposes and not for any other reason. 

 

The only way you can ensure that you achieve this is to store all the receipts of all deductions safely. When the home is used solely for business purposes, you may deduct a portion of the expenses related to your home, such as homeowners insurance and mortgage interest, among others. 

 

In other words, a home office expense is a deduction that is allowed only if the home office meets at least one of any of the criteria below: 

  • The home office is the place where the business takes place. 
  • The home office is where the business owners meet with clients and customers as any other typical business day. 
  • Where business is conducted is a separate structure from the property and is not attached to the house. 

 

  1. Automobile expenses

Automobile expenses are another expense that is deductible when you are working from home. This applies if you have to drive a car for business occasionally. Any automobile mileage related to the company is tax-deductible, except for commuting to and from the place of work. As long as the travel is made solely for business purposes, it is considered a business expense. The mileage deduction is calculated using two different approaches that are allowed by the IRS. Unfortunately, car insurance is only deductible for a small selection of individuals.

 

  1. Entertainment and travel expenses

Travel and entertainment costs are only deductible if they are directly related to the business or associated. In other words, if the company took place during entertainment or business was immediately discussed before or after entertainment, then the deduction applies. Any business-related travel is fully deductible.  

 

  1. Health insurance

Even though you are working from home, you are still an employee who is on the payroll. Health insurance benefits that are provided to employees are considered as tax-deductible. However, those who are self-employed can deduct a portion of their income for health insurance. 

 

  1. Business expenses

Working from home means that you are still conducting business-related functions. The only difference is that you are not physically at your place of work. There are some everyday expenses for running a business for which you can take a deduction. They include employee benefits, legal and professional services, advertising, office supplies, rents, wages, and other operations conducted at home. 

 

  1. Travel expenses

You can make deductions of ordinary and necessary travel expenses that you incur while traveling on business. You should keep your records checked and updated such that the amount for each item, such as lodging, meals, and transportation, are included. Keep track of the date of departure and return for each trip that you take, and the number of days spent on the trip, and any other information that may be useful. While traveling for business, your laundry and cleaning expenses should also be kept well because they are deductible. 

 

  1. Equipment purchases

When working from home, you should communicate with your employer to give you some equipment to work effectively from home. However, suppose this is not provided, and you buy equipment for the business. In that case, you can deduct a portion of the equipment cost in the year in which equipment was placed in service. Also, you need to check with your tax professional to check the limit for the current year. 

 

  1. Maintenance and repair work

As long as you incur costs for maintenance and repair of any office equipment, it is deductible. This is the cost you incur in bringing back an asset to its original condition or the price incurred in keeping an asset operating effectively at its present condition. So, for example, assuming that you are working from home and using an office laptop. Then the computer breaks down when using it, and you take it for repair, then that expense is deductible. 

 

  1. Delivery expenses

Suppose the company deals with a variety of products. In that case, delivery expenses are incurred in getting a product from the company to the customer’s hands. This includes gas and oil costs and other transportation costs that are incurred in the process. 

 

  1. Self-education expenses

You can also claim a deduction for self-education only if the teaching of the study you are undertaking relates to your current employment activities. The course must be connected to your everyday employment activities to either;

  • Maintain or improve a specific skill that is necessary for your current line of work.
  • Is likely to result in an increment in your income.

 

It is only under the above scenarios that you can claim your self-education expense. If your course is not related to your current employment activities, you cannot claim it.  

In summary, working from home is very effective and convenient for many people. This is mainly because of how flexible it is. All of the above are some of the expenses that are deductible when you are working from home. Therefore, you need to be aware of what to claim and what not to claim. 

Rose Rosie is a writer for the personal finance website, Joy Wallet, which provides readers with useful information, resources, and tools to help maximize their financial fitness.