work from home, Coronavirus, social distancing, COVID-19, home office

Firstly, one of the biggest deductions available is the one taken for home office space. This is a strange and disorienting period of isolation due to the COVID-19 pandemic. Many workers have been told to work from home. Many are wondering whether they’ll be eligible for that additional tax benefit. Unfortunately, the short answer to that question is probably “no.”

You can always hire a tax preparer to do your US expat taxes for you. However, you probably know that the most effective way of reducing your tax liability is through deductions and tax credits.

Here’s why:

You may have rearranged your home in order to provide yourself with a dedicated space and workable environment. Nonetheless, it’s unlikely that you’ll be able to write off the cost on your 2020 taxes. That’s because there are specific criteria for qualifying for that credit. Additionally, being home from your job temporarily doesn’t rise to those requirements.

If you want to check yourself against the IRS rules, read the rules below for claiming the home office deduction:

  • You must have an area of your home that is set aside for work only. People who qualify will have an office, pantry, small closet, sunroom, garage or other space as workspace. Sitting at your kitchen island or setting up a desk in your bedroom does not qualify. The area cannot be used for any other purpose.
  • You must be self-employed. Though there was a time when employees who worked at home were able to take the credit. That went away with the passage of the Tax Cuts and Jobs Act. The law eliminated employees’ ability to take deductions for miscellaneous itemized deductions. This is exactly the way that people who aren’t self-employed were able to deduct the costs of working from home. With the elimination of that ability, it makes no difference. An employee can work home temporarily because of the virus or has always worked from home – the deduction is not available.
If based upon the criteria above, you do qualify for the home office deduction, there are a couple of ways to go about it.

One is to use the simplified method. You simply calculate the square footage of the area in your home you’re using as an office and multiply it by $5 to determine your deduction. The maximum you can take is 300 square feet, or $1,500.

The other option is to add up both your direct and indirect home office expenses.

This is much more complicated. It takes far more mental work, but it can yield a larger deduction. Especially if you’re buying equipment. It counts as a direct expense that can be deducted in full. You add those purchases to a percentage of your indirect expenses reflective of the percentage of your home that your workspace takes up. Indirect expenses are the costs in simply keeping your home running. Those include gas, electricity, and other costs that don’t relate to your work. However, they do make your workspace workable..

Important Takeaways

It is tempting to try to leverage the fact that you’re home and use it towards next year’s tax filing. However, you can be sure that the IRS will be watching for it. Remember the following takeaways before you decide to take the deduction:

  • Only self-employed taxpayers can take it. Unless there is some kind of change in the tax code, employees will remain ineligible despite working from home.
  • If you’re calling it your office, make sure that it really is one. Sitting at the dining room table with your kids next to you does not count.
  • Track all expenses meticulously. That means every receipt. Whether it is for equipment and office supplies or your monthly electric bill.
You may not be able to use the fact that you’re working from home to get an extra deduction. But that doesn’t mean that you can’t take advantage of it.

Use your enhanced awareness and extra time to monitor your expenses. See what you can do to organize your receipts. Pay attention to potential write-offs. The people who get the biggest tax refunds are the ones who pay attention, stay organized, and educate themselves about the possibilities.

Have any questions about the home office deduction or any other tax reduction strategies? Contact this office.

FREE U.S. tax guide for Americans abroad

The only e-book about U.S. international taxation, which you need to read as U.S. expat:

1. Foreign Tax Credit vs. Foreign Earned Income Exclusion

2. What is the danger of holding a Controlled Foreign Corporation?

3. Why more and more people are renouncing U.S. citizenship?

Thanks for requesting our free tax guide! It will be delivered to your inbox shortly.