If you’re one of the millions of people who began working from home last year due to Covid-19, you may be wondering whether you can deduct work-related expenses from your income taxes. Maybe you outfitted your living room with a fancy desk and comfy chair, upgraded your wifi, bought better lighting for all your Zoom calls, and watched your utility bill rise — can you write-off those expenses and, even better, part of your home?
While you probably won’t be able to write off many work-related expenses if you’re a salaried employee, you may be able to take advantage of a few deductions if you’re self-employed. Here’s everything you need to know:
Can I write-off work-related expenses from my taxes if I worked from home?
Unfortunately, if you accumulate expenses such as office furniture and other tools for your work as a salaried employee, you probably won’t be able to write them off. In the past, you could deduct unreimbursed expenses that exceeded 2% of your adjusted gross income, but the Tax Cuts and Jobs Act of 2017 paused these deductions until the end of 2025.
The good news is if you’re an employee in Alabama, Arkansas, California, Hawaii, Minnesota, New York, or Pennsylvania, you may be able to deduct home office expenses on your state return.
Additionally, if you’re self-employed or an independent contractor, you can still deduct “ordinary and necessary” expenses related to your business. (That’s a fancy way of saying expenses that are helpful and make sense for your profession, such as internet service, office supplies, office furniture, marketing costs, business travel, and work-related meals.)
Can I claim the home office tax deduction if I worked from home?
The home office deduction lets you reduce your tax obligation by claiming part of your home as a business expense.
If you have a home office and use it for your job as a salaried employee, you sadly can’t take advantage of this deduction. The IRS explicitly states that “employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.”
However, if you run your own business, have a side hustle, or do contract or gig work, you may be able to claim the home office tax deduction if your home is your principal place of business and your home office is regularly and exclusively used for work.
This means if you work in your spare bedroom during the week and let your friends crash in that room whenever they’re in town, for example, you wouldn’t be able to deduct that room. Similarly, if you work and eat at your dining room table, you can’t deduct that area, either.
There are two ways you can calculate your home office deduction (if you’re eligible for it):
- Simplified method: You can deduct $5 per square foot of your home used for business purposes (up to 300 square feet, or $1,500).
Regular method: You can deduct the percent of your home used for business purposes from qualified home-related expenses, such as utilities, property taxes, rent, insurance, maintenance, and mortgage interest. This method may allow you to claim a larger deduction than with the simplified method, but it’s more complicated to calculate, so make sure you keep good records and do the math correctly (or hire an accountant).
What work expenses can I write off if I work from home?
In short, if you’re a salaried employee, you can’t claim a deduction for unreimbursed employee expenses unless you have certain qualified educator expenses or fall into one of these categories specified by the IRS:
- Armed Forces reservists
- Qualified performing artists
- Fee-basis state or local government officials
- Employees with impairment-related work expenses
If you fall into one of those categories, you can deduct ordinary and necessary unreimbursed employee expenses incurred during the tax year. Qualified teachers can also deduct up to $250 for unreimbursed work expenses.
While it may feel unfair that most salaried employees can’t take advantage of these deductions, keep in mind that self-employed individuals also usually have to pay self-employment tax on their net earnings in addition to their regular income tax.
Did COVID-19 change how I should file my 2020 taxes if I worked from home?
No. While many people worked from home in 2020, the government hasn’t passed any special federal tax breaks or work from home tax deductions.
The bottom line
While you may not be able to take many work from home tax deductions if your employer made you work from home during the pandemic, you may be able to save money in other ways.
If you’re continuing to work from home and don’t need to commute to the office for the foreseeable future, for example, switching to pay per mile car insurance—such as through Metromile—can be a quick and easy way to cut costs. According to a 2018 survey of new Metromile customers who saved, drivers can save $741 a year without sacrificing their coverage or experience. Get a free quote to estimate how much you could save today.