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Can I Take a Tax Deduction for Working From Home During Coronavirus?

By Maurie Backman – Sep 4, 2020 at 11:04AM

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Many people have been forced into remote setups during the ongoing health crisis. But will you get a tax break out of the deal?

Working from home was once an option reserved just for freelancers and employees of companies with very flexible policies. But nowadays, much of the labor force is working from home due to the ongoing COVID-19 crisis.

If you've landed in a remote arrangement due to the pandemic, you may be wondering if doing so will allow you to save money on your taxes. But unfortunately, you may not like the answer.

Why many remote workers won't get a tax break this year

You may have heard that there's such a thing as a home office deduction, and if you've been doing your job from home, you might assume that you're eligible for it. But the rules surrounding this deduction are pretty strict.

Woman typing on laptop while dog sits on table next to it

Image source: Getty Images.

For one thing, to qualify, you must have a dedicated area of your home that's used solely for work purposes. That area doesn't need to be a separate room with a door, per se, but it's a space that can't double as something else. As such, you can't claim your kids' playroom as a home office, even if that's where you do the bulk of your work lately while simultaneously trying to break up sibling fights.

Additionally, your home office must be your primary place of business. If you're still going into an office three days a week and working from home twice a week, it won't count.

But here's the real kicker: Even if you meet the two requirements above, you still can't claim a home office deduction on your taxes if you're not self-employed. Prior to the Tax Cuts and Jobs Act of 2017, salaried workers could claim home office expenses via the miscellaneous itemized deduction. But now, that deduction is off the table, and so, too, is a home office if you're not self-employed.

Prepare for another unpleasant tax surprise

Another thing to be aware of is that if you've been working remotely from another state -- say, you decided to hide out in a cabin in the woods three hours from home during the pandemic and do your job there -- you may be hit with an income tax bill from that second state. Certain states have reciprocity agreements in place so that if you live in one and work in another, you won't have a second state tax bill on your hands. But if you've been working from a state that isn't your state of residence, it pays to do some digging to see if that might result in a tax liability.

The COVID-19 pandemic has changed the way a lot of people work. But unfortunately, your new arrangement may not render you eligible for any new tax breaks, so don't be fooled into thinking otherwise. If anything, you might actually have a larger tax bill on your hands if you've been doing your job from a remote location in another state, so prepare for that possibility to avoid a financial crunch when your 2020 taxes come due.

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