Thanks to virtual collaboration tools such as Slack and Zoom, employees are no longer bound to physical office spaces. However, going remote doesn’t always mean fewer overheads, whether you’re traveling the world as a digital nomad, or building a work-from-home set-up from scratch.
If you’re looking to ease the financial burden associated with flexible working, there are a number of tax deductions you may be eligible for. From home office deductions to vehicle mileage expenses, a lot of these deductions are relatively unknown but can end up saving you a fortune altogether.
To make sure you’re not spending a cent more than you should be, we’ve rounded up some important WFH tax deductions that you should know about in 2024, as well as some that you shouldn’t bother applying for.
Which Remote Workers Can Apply For Tax Deductions?
You’re currently only able to write off business expenses on tax forms if you’re an independent contractor or a self-employed worker in the US. While W-2 employees used to be eligible for work-from-home tax deductions, this changed after a tax reform in 2018 and is set to remain in place until at least 2025.
There are some important further details, too. Only some states – such as New York, Alabama, and California – allow taxpayers to claim back costs associated with working from home on their state income tax returns.
The Fair Labor Standards Act states that all US employees are entitled to reimbursement if WFH costs cause an employee’s earnings to fall below the federal minimum wage.
Which Tax Deductions Are Remote Workers are Entitled to?
Think you’re eligible? Here are some remote expenses that you could potentially write off on your income taxes:
- Home office deductions
- Educational and development expenses
- Office supplies and equipment
- Vehicle mileage
- Business travel expenses
- Health insurance premiums
- Retirement contributions
1. Home office deductions
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Self-employed and contracted employees are likely to be able to claim home office deductions if their working space is used for no other purpose. If you’re eligible, you could be able to make deductions for a range of home-related expenses including mortgage interest, property taxes, homeowners insurance, utility bills, and more. You’ll only be able to deduct the portion of home expenses related to your home office though, as opposed to the costs associated with your whole property.
In rarer cases, remote W-2 employees may be eligible for home-office deductions too, if their home office is used exclusively for work and their employer isn’t able to provide them with a suitable office elsewhere.
2. Educational and development expenses
Educational expenses related to your profession are likely to be tax deductible. This means if you’re taking a learning or development course, either online or in-person, its licensing cost and the costs of accompanying materials like books could be deductible.
This is normally only the case for self-employed and independently contracted workers. However, plenty of regular employers offer workers training budgets as part of their employee benefits package, so it’s always worth checking your work contract to see what growth opportunities you’re entitled to.
3. Office supplies and equipment
Remote self-employed workers and independent contractors can deduct up to $1,050,000 for office supplies like printer ink, paper, and stationary, as well as equipment like desks, laptop stands, and office chairs. However, for the items to qualify, they need to be deemed essential for you to carry out your job, and can’t be seen as luxuries.
4. Vehicle mileage
If your job requires you to be on the move, you may also be able to deduct tax on your vehicle’s mileage. Typically, you’re able to claim the dedication by calculating the actual expense incurred, or by using the IRS standard mileage rate.
If you decide to claim back these tax expenses, we’d recommend keeping a note of the distance you’ve driven for business purposes, compared to distances covered for personal reasons. We also advise keeping track of all car-related expenses such as insurance, registration fees, parking, and maintenance, as these costs may be eligible for tax exemptions too.
5. Travel expenses
If you’re a remote worker who needs to travel for business purposes, the costs associated with these trips may be tax deductible. This could include the cost of public transport on trains and buses and even potentially airfares.
You’ll likely be able to deduct the costs of other business expenses as well – for example, food, accommodation, and entertainment – as long as they’re necessary to the nature of your job.
6. Health insurance premiums
If you’re a self-employed worker who currently covers the cost of health insurance, you may be able to deduct tax premiums for yourself, your spouse, and your dependents. Qualifying health insurance includes medical insurance, some qualifying long-term care coverage, and all Medicare premiums (parts A, B, C, and D).
However, self-employed workers are only able to claim these write-offs if neither they nor their spouse are eligible for an employer-subsidized healthcare plan. The amount they’re able to deduct is also likely to be dependent on their age range, with elder applicants typically being eligible for larger tax deductions.
7. Retirement contributions
Self-employed remote workers on certain retirement plans may be able to deduct these contributions, reducing their taxable income as a result. Qualified plans include 401(K) and SIMPLE-IPA. However, it’s important to note that your SEP or IRA retirement account contributions are not tax-deductible.
What WFH Tax Deductions Can’t You Claim?
While remote workers are eligible for a wide variety of tax deductions, there are a lot of expenses that won’t be able to be written off. The most common reason claims are rejected is because they’re too personal, while non-deductible claims will also be void. To help the process go as smoothly as possible, here are some tax deductions you should avoid filing:
- Non-business travel including personal mileage costs and personal public transportation costs
- Home rent or mortgage expenses related to areas of your property outside of a dedicated home office
- Personal meals, snacks, or beverages that haven’t been directly related to business activities
- Non-work-related clothing that isn’t uniform or industry-specific
Once you’ve worked out which deductions you could be eligible for and armed yourself with the necessary documents and receipts, you’re ready to submit your claim.
Filing your taxes for the first time? You can rest assured, there are specialist accounting platformed designs to make the processes as straightforward as possible. Read our guide to the best accounting software for the self-employed to find out which tool is best for you.
