UNITED STATES—Now that working from home has become the norm, the most obvious question that follows is: what tax deductions can you get? It’s certainly a valid question to which the answers are not cut and dry. It’s important to note that even before the global events of 2020, working from was already something that a fair amount of employees were subscribing to.
Employers recognized the various benefits that working from home had to offer, such as flexibility, employee retention, attracting new talent, increased staff motivation, increased productivity, improved staff health and well-being, less absenteeism, less vacations, and financial benefits. In essence, it’s quite easy to see that working from home was already gestating; all that 2020 did was to scale it up. Of course we also have technology to thank. Just a few years ago wholesale work-from-home initiatives would have been challenging to say the least, and then of course there’s the fact that working from home doesn’t suite everyone. For some, it’s solved many problems, for others it’s created many more, but there is a common thread to it all, and that’s tax.
There’s an entire slew of advantages when it comes to working from home; advantages that are applicable to both employer and employee. It can be argued that working from home has nurtured what in biology is referred to as ‘mutual symbiosis’ – a process whereby both organisms benefit from a relationship or association. For instance, ‘flexibility’ enables employees to have better suited hours by which they might even work weekends. Employers can benefit from such agility especially if there’s a client in a different time zone.
Flexibility can feed into ‘improved employee retention’ because now the employee can attend to childcare needs while reducing spend on commuting. The option to work from home can also attract new talent as it of its own an incentive to many in the job market. The office environment is one filled with distractions – meetings, water cooler banter, cigarette breaks, lunch breaks – all of which are reduced in a work-from-home environment, which in turn leads to more focus, potentially longer hours, and eventually increased productivity. These are but some of the many incentives that both the employer and employee get from a work-from-home situation.
As noted earlier, working from home is not for everyone. For some employees structure, routine, and the personal interaction of fellow employees is of immense importance – something inherent in the workspace. For those with children, having to suddenly work from home can prove challenging due to new boundaries and interruptions. Then there’s also the sense of isolation that many employees feel, often characterized through a sense of disconnection.
Employers on the other hand could also have a tougher time managing their employees who might take advantage of a situation in which not all their work-related movements can be accounted for. For others working from home, there might be no dedicated space to work from and this could be attributable to a number of reasons which in turn can lead to a series of constant distractions. Despite the comfort and convenience afforded to many who work from home, the possibility of burnout is quite real and it’s usually attributable to a lack of distinction between home life and work life.
And the tax
Tax; it’s inevitable and inescapable unless you relocate to some obscure tax haven like the Virgin Islands or Malta, and even then there’s no guarantee. However, what are the tax implications if you’re working from home? For one thing, they’re different for your neighbors across the pond, and probably better too. For instance, in the US, if you’re working from home and you’ve had to buy a desk, a chair, or a computer – you’ll want to know if these items are tax deductible?
What about utilities like water, heat and electricity? Well, thanks to Trump, the answer is “no.” Back in 2017 POTUS did away with itemized tax deductions when he signed the tax reform measure. What if you submit receipts to your company for costs incurred – will the reimbursement be taxable as wages? Good news – no. However, if your employer gives you a monthly stipend for expenses, that will be taxable. Home office space is another matter altogether – if you’ve got a designated office space, it’s deductible by California law – but if you’re working in your lounge, that’s a no as it’s not deemed as office space.
Across the pond in the UK things are more amenable. For one thing, those working from home can enjoy tax free investments when trading GBP to USD. There’s also a tax relief system that doesn’t require complicated calculations or receipts. Sure, it’s there due to the pandemic, but there’s just some things the Brits will always do better.