Last spring, many of us left the office to begin working remotely from home. If you were one of them, you know that you tackled multiple issues, including juggling work and family responsibilities, remote learning for your kiddos, and challenges with the logistics of several adults working from the same home at the same time. It was a tumultuous time, so congratulations for dealing with it powerfully and creating solutions that worked for everyone—most of the time, anyway. Whew!
Now, with tax time approaching, you may be wondering about any tax implications of working remotely that you need to address. So, let’s take a look at the tax issues of remote employment.
What tax issues? I still pay tax on my income, right?
Yes indeed. The income from your job will be reported to you on a W-2 in January, and you’ll report that income on your tax return. Nothing there has changed, at least for the federal tax return. But you may have special tax issues to deal with when you file your state income tax return, unless you live and work in a state that has no income tax.
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 the pandemic hit and commuting to the office became a thing of the past, many people left urban areas and moved to the less-populated country where it was less expensive to live. If you crossed state lines and now live in a different state from your former office, you’ll need to factor in 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 that’s the case, 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. Be sure to use tax preparation software such as TurboTax® that considers the facts and circumstances of your employment situation and how they relate to state tax laws.
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, with the exception for teachers. Teachers can still deduct up to $250 for supplies used in the classroom. If you aren’t entitled to a deduction for your expenses, your best bet is to ask your employer to give you a non-taxable reimbursement for those costs.
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