Home Office Tax Deduction For Employees Who Continue to Work at Home Not Likely

According to Law360, Despite a continuing trend of employees working from home during the pandemic, congressional lawmakers have shown little interest this year in expanding a popular tax deduction to telecommuters forced to abandon their office cubicles.

Tax pros and Capitol Hill tax aides say the renewal of the home office deduction is not on Congress' radar, especially since the provision's elimination was tied to eliminating all other miscellaneous deductions and doubling the standard deduction as part of the GOP's 2017 Tax Cuts and Jobs Act.

The tax law has had the dual impact of providing larger tax refunds for American workers while also lowering the number of Internal Revenue Service audits of tax returns claiming the deduction under Internal Revenue Code Section 67(g), they said.

Under the TCJA, Republicans eliminated the miscellaneous itemized deduction from 2018 to 2025, thereby raising $668.4 billion in revenue. Before that change, employees with home offices were allowed to deduct eligible work-related expenses above 2% of their adjusted gross income. Eligible expenses included legal fees, professional subscriptions, uniforms, medical examinations required by an employer, tools and job search costs.

Even though the deduction isn't currently available to teleworkers, who have used their own money to make their remote home offices workable for their employer, other taxpayers are still benefiting from the tax break. 

Self-employed business owners, independent contractors and gig workers never lost their ability to write off their home office expenses even as federal and state governments began mandating that office buildings close and employees work from home.

Rep. Joseph Morelle, D-N.Y., said he is working to add the tax deduction back to the code for employees who work from home.

So far, Morelle's bill hasn't drawn any lawmakers willing to co-sponsor it and the House Ways and Means Committee has not considered the legislation. 

If the deduction is restored, it could prove useful to millions of American workers who are growing used to not traveling outside their homes for work.

The Pandemic Has Boosted Telecommuting In Almost 40% Of U.S. Households, According To A Blog Post From The U.S. Census Bureau, Based On Its Household Pulse Survey Collected Between August And December 2020.

Most telecommuters are from wealthier households with income above $200,000 while households with incomes under $25,000 were less likely to telecommute, the Census Bureaus figures show.

Keith Hall, president of the National Association for the Self-Employed, estimated that roughly one-third of all small-business owners do not claim the home office deduction because they think it's too complicated, or it's a red flag that will cause the IRS to automatically audit them. However, he said the rules for the deduction allow a simple calculation based on the amount of space used in the home.

"I'm confident that every single one of those self-employed business owners is doing some work from home" and should be claiming the deduction, Hall said.

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