Tax season invariably sees taxpayers seeking ways to reduce their liabilities. This group includes remote workers who, in 2024, faced significant overheads in maintaining their home offices. Though several organizations called their personnel back into the office, remote and hybrid work was still a significant trend. Reports indicate that over one-third of employees continued to work remotely to some extent in 2024.
Unfortunately for remote workers, costs such as increased electricity bills or new office furniture purchases can't be deducted from their taxes. This change came into effect in 2018 under the Tax Cuts and Jobs Act, which broadly prohibited remote employees from deducting home office expenses. This prohibition is set to last until 2025 when the Act expires. However, incoming President Donald Trump has pledged to extend this tax act.
Tax professionals have suggested alternate methods remote workers can use to recover their expenses. Although they cannot deduct home office costs, these workers can solicit tax-free reimbursements from their employers. In 2024, more than half (56%) of companies offered to pay for work equipment, says a report from the Society for Human Resource Management.
While the federal government doesn't mandate such reimbursements unless the home office expenditure drops an employee's income below minimum wage, 11 states do require companies to compensate necessary expenses. If the reimbursements fall within an understandable plan, they become tax-exempt. However, employees must submit evidence of these expenses to their company.
With this strategy, it's essential to tread carefully, thoroughly reading the contract details to understand the compensation policy. In Crystal Stranger's words, an enrolled agent and CEO of Optic Tax, "If your employer is reimbursing you for that, then technically, the monitor, the desk, the chair, it actually belongs to your employer. So what's going to happen if you leave your employment?".