If you are employed by a company but you work from home, then you fall into the category of telecommuter. Instead of physically commuting to work, you virtually commute via phone, chat, email, and video calls.
Reasons for Telecommuting (And Why They Matter)
Telecommuting can be arranged due to employee preference. For example, maybe telecommuting helps you avoid an arduous physical commute. Or, maybe your family needs to move across the country, but you want to stay with your company (and they want to keep you, too!).
In other cases, telecommuting may be necessary due to the type of work you do or the type of company you’re with. Needless to say, if you work for a company that doesn’t have a physical location, it’s likely that all of the employees telecommute! Or, if your particular role in the company calls for you to work outside of normal hours and it’s not possible for you to be in the office, telecommuting is also a given.
These two distinctions are important to keep in mind when dealing with the question of home office tax deductions: Are you a telecommuter because it’s better for you or because it’s better for your employer? The IRS allows you to deduct the cost of maintaining a dedicated home office only if you telecommute for the convenience of the company.
Rules for Deductions
If you meet this criteria, you then have to meet the regular home office burden applied to freelancers and other self-employed/work-at-home individuals:
- Your home office must be your principal place of business—in other words, where you work most of the time. Barring that, a space can also qualify if you regularly use it as a location to meet clients or conduct business, or if it’s a separate physical structure on your home property (like a garage or outbuilding) used for work.
- Your home office must be dedicated space used exclusively for work—and nothing else.
If all of the above are true, congratulations: you can deduct the cost of keeping a home office!
Now, you must decide whether to calculate this cost using the actual method (taking a percentage of any whole-property expenses like rent, mortgage, utilities, etc.) or the simplified method ($5 per square foot of space).
If all of this seems overwhelming, don’t despair! The team at Taxation Solutions, Inc. is here to help. We are your local tax experts, and we are here to assist with all of your telecommuter home office quandaries. If you have office-related telecommuter tax questions in the St. Louis area, call us today!