How working from home might hit bottom lines at tax time

Photography by Casey Yoshida / Brian Baker

As the work-from-home movement shifts from stopgap measure to everyday reality, there are all kinds of financial questions to consider on both the employee and employer side. Brian Baker, a certified public accountant and partner with HHM CPAs, has some answers.

Q: One question I hear a lot is about the deduction of office expenses for people who are now working from home. Can I write off my fancy new office chair or my jumbo pack of multi-colored sticky notes?

A: Unfortunately, if you’re an employee, the 2017 tax reform suspended the deduction for unreimbursed employee business expenses for years 2018 through 2025. If Congress does not pass any additional law and this runs its course, then beginning in 2026, that deduction will automatically come back. But who knows what will happen between now and then? For the moment, this means no deduction for the home office including furniture, equipment and supplies. However, the deduction for self-employed individuals is not impacted, so sole proprietors and other self-employed folks can still claim their business expenses as they have in the past.

Q: What if I’m an employer and I buy supplies or equipment for my employee who is working from home?

A: If an employer buys supplies for employees working at home, those expenses should be deductible by the employer. Employers can also reimburse employees for supplies bought by the employee. For example, if an employee has an expense related to their work as an employee – say they buy paper for business use – the employer reimburses them for the cost of the paper. As long as its done through an accountable plan, the employer can deduct that expense and the employee does not have to claim it as income. The employee does have to show the business connection to the expense, provide a receipt. Another situation may be that the employer pays the employee $100 a month to cover expenses. If there’s no requirement that the employee pay back any excess amount after expenses, the full $100 is treated as wages.