Updated: Oct 22, 2020
2020 has been different, to say the least. With so much change, you may have questions about changes to your taxes. Here are three common questions we have gotten as a result of the shift to working from home.
1. My employer bought me a monitor to help me work from home. Will I have to pay tax on this in April 2021?
If you’re an employee, the answer is likely no. The Tax Cuts and Jobs Act (TCJA) of 2017, also known as tax reform, reduced the substantiation requirements applicable to items such as laptops, monitors, printers and other peripherals that employers provide to employees in support of their work-from-home set up. So, you should not expect to have any additional amounts added to your W-2 related to these benefits - which is good.
2. Can I claim the home office deduction for myself?
The answer is: It depends. If you are an employee, the answer is unfortunately no. Employees have not been able to take advantage of this tax-saving opportunity since tax reform disallowed it in tax year 2018. Self-employed individuals, however, may be eligible for the deduction depending on their situation. For more info on this always-popular topic, see our article, Can Working From Home Lower My Taxes This Year?
3. How do I distinguish between business and personal expenses in my home?
For those who are self-employed and are looking to take advantage of the Home Office Deduction in 2020, the question of how to distinguish between business and personal use for expenses such as internet usage and cell phone service can be hard to answer.
In the eyes of the IRS, you will just need to provide them with a reasonable basis to estimate the percentage attributable to your business. For internet and cell phone expenses, this can be achieved with the billing statements from your providers coupled with credible testimony to support your deduction amount. It also wouldn’t hurt to be able to provide some calendar entries of all of the phone calls you have in a typical month or, depending on your business, bills you may have sent to your customers for time spent on the phone with them.