Tax Implications of Working Remotely: Q and A
Last spring, many of us were asked to leave the office and begin working remotely from home. If you were one of them, you juggled work and family, including children newly banished from their schools. It has been a tumultuous time, so congratulations for dealing with it powerfully and creating solutions that worked for everyone. Now, with tax time approaching, there are tax implications of working remotely that you need to address, and we are here to help. So, let’s take a look at the tax issues of remote employment.
What tax issues? I still pay tax on my income, right?
Of course. The income is reported to you on a W-2, and you’ll report that income on your tax return. Nothing there has changed, at least for the federal tax return. But unless you live and work in a state with no income tax, you may have special tax issues to deal with when you file your state income tax return.
What’s different about state returns for remote employment?
If you live in the same state in which your employer is located, state taxes are pretty straightforward. But when commuting became less common, many people left urban areas and moved someplace less expensive. One of the major tax implications of working remotely is If you now live in a different state from your former office, you may be dealing with the income tax rules of two states, not just one.
Oh no! Do I owe taxes to both states?
Good question – it depends. Most states look to your physical presence in determining whether to tax you. If you live and work in one state for an employer in another state, you will only owe tax to the state in which you live and work. But each state is different, so be sure to use tax preparation software such as TurboTax® that considers the facts and circumstances of your employment situation in light of the tax laws of the states involved.
Can I deduct the costs of working from home, such as my computer, internet, office furniture, and supplies?
Probably not. Unfortunately, the tax act passed at the end of 2018 axed those deductions for most employees. The exception is for teachers who can deduct up to $250 for supplies used in the classroom. If you aren’t entitled to a deduction for your expenses, try asking your employer to give you a non-taxable reimbursement for those costs.
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The information in this article for general educational purposes only and not intended to provide specific advice or recommendations. Please discuss your particular circumstances with an appropriate professional before taking action.