You get a home-office tax break, right? No and yes

Millions of Americans are working at home during the coronavirus pandemic. You’ve created a nice backdrop of books, awards and knickknacks to impress your colleagues during Zoom conferences. You’re also paying for the utilities and internet service you need to do your job for your employer.

A lot of readers have asked: We must qualify for a home office tax deduction, right?

Don’t get your hopes up about that tax break, said Arthur Zatz, a tax attorney in Isdaner and Co., a Bala Cynwyd accounting firm.

Self-employed people can write off some home office expenses — many freelancers were already taking a home-office deduction before the coronavirus. But the Tax Act of 2017 eliminated a lot of individual tax breaks, including the home-office deduction for employees, Zatz said.

But there’s a glimmer of hope for employees.

Tax experts say there is a little known tax-free way for employers to reimburse workers for costs during a disaster that normally would not be eligible for reimbursement. That might include child care, commuting costs or even funeral expenses for COVID-19 deaths. It’s getting a lot of online discussion these days by tax professionals.

The 2017 Tax Cut Act dramatically increased the standard deduction to $12,000 for individual taxpayers ($24,000 for joint-filers). But it eliminated a lot of deductions, including unreimbursed employee work expenses. The aim was to simplify tax preparation: About 46 million taxpayers itemized deductions in 2017. Fewer than 17 million itemized in 2018. About 90% of all taxpayers now claim the standard deduction.

If you’re an employee, the home office deduction is no longer an option.

Many self-employed workers already deduct costs for home offices. Some self-employed people who work in offices that are shut down because of the coronavirus lockdown may want to explore deducting costs of working at home, tax professionals say.

If you are self-employed, you can deduct the business part of your home used exclusively and regularly for trade or business purposes, according to H&R Block. The business part of your home must be either your main place of business, the place where you meet or deal with customers, or a separate structure that you use in connection with your trade or business.

Home office deductions can get complicated. You should consult a tax professional.

In Pennsylvania, you can write off unreimbursed work expenses on your individual state tax return. But that does not include the cost of the physical space in your home, Zatz said.

Pennsylvania tax authorities have become “very formalistic” about unreimbursed employee work expenses, and spell out types of legitimate expenses, including things like cell phones, tools, office supplies, and professional subscriptions, he said. You will need to document the expenses. It helps to get a letter from your employer indicating that the expenses are necessary and not being reimbursed.

In New Jersey, there’s no wiggle room on your state taxes. Unreimbursed employee costs are not deductible, said James B. Evans Jr., a CPA and attorney with Kulzer and DiPadova law firm in Haddonfield.

“If you are an employee, then New Jersey doesn’t allow for any employee business deductions, so you would not be able to take a deduction for home office or other costs related to your employment,” he said.

A member of a partnership or of a limited liability company that’s taxed like a partnership might be able to take some out-of-pocket costs against income from the partnership or LLC, Evans said.

Under a law called the Stafford Act, employers can provide tax-free assistance to employees during a disaster. Typically, this is a localized event such as a hurricane. The law was also expanded after the Sept. 11, 2001 terrorist attacks. The pandemic is a nationwide emergency, so a multitude of employers might reimburse some employee expenses.

“A number of our clients have taken advantage of it for specific situations,” said John E. McGrady III, a CPA and tax lawyer at the Buchanan Ingersoll and Rooney law firm in Pittsburgh.