7 WFH Tax Deductions Remote Workers Are Entitled To
With the rise of virtual collaboration tools like Slack and Zoom, more people are working from home than ever before. While working remotely can be convenient, it often comes with its own set of expenses. Fortunately, there are several tax deductions available that can help ease the financial burden. Here are seven tax deductions you should be aware of in 2024:
Who Can Apply for These Deductions?
In the U.S., only independent contractors and self-employed workers can write off business expenses on their taxes. Although W-2 employees used to qualify for work-from-home tax deductions, this changed after the 2018 tax reform and is expected to remain unchanged until at least 2025. Additionally, only some states, such as New York, Alabama, and California, allow remote work-related tax deductions on state income tax returns.
1. Home Office Deductions
If you use part of your home exclusively for work, you may be eligible for home office deductions. This can include a portion of your mortgage interest, property taxes, homeowners insurance, and utility bills. However, you can only deduct the expenses directly related to your home office space.
2. Educational and Development Expenses
Expenses for educational courses and professional development that are directly related to your profession can be tax-deductible. This includes the cost of courses, books, and other materials. While this usually applies to self-employed and contracted workers, some employers offer training budgets as part of their benefits package.
3. Office Supplies and Equipment
You can deduct the cost of office supplies and equipment necessary for your work, such as printers, paper, desks, and chairs. There is a limit of up to $1,050,000 for these deductions, but they must be essential for your job and not considered luxuries.
4. Vehicle Mileage
If your job requires travel, you can deduct vehicle mileage for business purposes. You can calculate this deduction based on actual expenses or use the IRS standard mileage rate. Keep detailed records of business-related travel and associated costs like insurance, registration fees, and maintenance.
5. Business Travel Expenses
Travel expenses for business purposes, such as public transportation, airfare, accommodation, and meals, can be tax-deductible. These deductions apply as long as the travel is necessary for your job and the expenses are directly related to business activities.
6. Health Insurance Premiums
Self-employed workers can deduct health insurance premiums for themselves, their spouse, and dependents. This includes medical insurance, long-term care coverage, and Medicare premiums. However, you can only claim this deduction if you and your spouse are not eligible for an employer-subsidized healthcare plan.
7. Retirement Contributions
Certain retirement plan contributions, such as those to a 401(K) or SIMPLE-IRA, can be tax-deductible for self-employed workers. This reduces your taxable income, but note that contributions to SEP or IRA retirement accounts are not tax-deductible.
What Deductions Can’t You Claim?
While there are many deductions available, some expenses cannot be written off. These include:
- Personal travel expenses and mileage costs
- Home rent or mortgage expenses outside of a dedicated home office
- Personal meals, snacks, and beverages unrelated to business activities
- Non-work-related clothing that is not a uniform or specific to your industry
How to File Your Taxes
To claim these deductions, keep detailed records and receipts. Filing taxes can be daunting, but many accounting software platforms are designed to make the process straightforward. Consider using specialized accounting software to ensure you get the most out of your eligible deductions.
By understanding and utilizing these tax deductions, you can significantly reduce your tax burden and keep more of your hard-earned money while working from home.
