Working from home? Here’s what you can (and can’t) deduct on your tax returns
(NEXSTAR) – Now that you’re working from home, you might be wondering which home-office deductions you can legally claim on your 2022 tax returns.
Well, we’ve got some bad news: Most employees working remotely during the pandemic are entitled to basically nothing.
“There’s a lot of misunderstanding, myths, and plain-old bad advice from Uncle Bob on the internet [concerning] home offices,” explains Mark Steber, the chief tax information officer at Jackson Hewitt and a tax expert with more than 35 years of experience. “Bottom line is, if you’re an employee, you generally don’t qualify for any home-office deductions.”
In other words, your “home office” won’t qualify you for any tax breaks unless you’re self-employed or you run your own business.
But if you do indeed run a business out of your home, or you were self-employed during the last fiscal year, “the sky’s the limit” if you have the documentation to back it up, according to Steber. For these taxpayers, both direct and indirect expenses are deductible to the extent in which they relate to your business. For instance, the IRS says repairs to your home office (a direct expense) are deductible in full, while things like insurance and utilities (indirect expenses) are deductible based on the percentage of your home that’s dedicated to doing business.
But what if you’re an employee, and you also run a side-business out of your home office?
“Then you again fall into the good category,” Steber says. “There’s people who are doing business on Amazon, Etsy … they’re not running a full-time business as you [usually] think of it, but it is a business.”
If, unfortunately, your work-from-home situation precludes you from the deductions you were hoping to take, Steber says taxpayers might be entitled to other tax credits simply because of any major life changes they may have experienced during the pandemic.
“There were quite a bit more life changes in the last few years,” says Steber. For instance, some people may have lost their jobs, or gone back to college, or welcomed a new baby — all of which could make them eligible for additional credits.
That said, Steber says it’s important for taxpayers to educate themselves on tax codes — or hire a professional — to make sure they’re getting the refunds they’re entitled to.
“If you shortcut the process … you will eventually leave money on the table that will not be recaptured easily,” he tells Nexstar.
Still feel like you might be entitled to something? Even despite your status as a work-from-home employee? In that case, you’re free to fill out a Form 8829 and send it along to the IRS. Stuber, however, offers a word of warning.
“You can try to put home office deductions on there,” he says, “but you’ll get caught pretty quick.”