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Home office deductions for employees - MDI-MTSkeptic

Posted: Nov 18, 2009

I did some research and have found that at least according to Federal Government guidelines, you can deduct home office expenses if you are an employee. The one big stipulation is that you are working at home because it is convenient for the employer. In other words, they cannot provide you with an office. Of course, in our case that is a no-brainer. The rest was pretty straight forward and much the same and I am doing now for tax deductions as an SE. My accountant is up to date on all changes, so he keeps me well advised.

I am posting my findings because some of us at MDI think that losing our SE status (which stinks) means we will no longer be able to take home office expenses as deductions. That is not true. However, it may vary where states are concerned. I suggest that those who are going to be employees for Transcend research their own state's criteria to see how that works.

I am leaning towards IC status but it is so confusing at this time as to what the criteria is for Transcend to do this that I may just give up and take PT employee status. I still do not think it is fair for PT employees to lose the 1/2 cpl when they have no benefits other than the 401K. That is the one thing that keeps preventing me from making the choice out right at this time. I have emailed the appropriate people to ask this and depending on their answer I will make my decision then. Good luck to all of us in this confusing and muddled time.

Employee v IC - MistyMT

[ In Reply To ..]
401k is not the only difference.

As an employee they pay their share of your SS and Medicare tax. As an IC, you bear the whole brunt of those taxes.

Since when is that a benefit? - MDI-MTSkeptic

[ In Reply To ..]
Perhaps a 401K is a benefit, though not one I am interested in, but withholding taxes does not qualify. So you are saying that we should give up 1/2 cpl because our taxes are taken out, including social security/Medicare? There are thousands of employees in this country but I do not think that they are paid less because their employer withholds their taxes.

Also, I failed to note in my post above that you can take home office expenses if you itemize on the Federal side. If not, then you cannot claim them as an employee. Again, depending on the state you are in, you may be able to claim those expenses for state and local taxes, which I am able to do here.

Is it a benefit - MistyMT

[ In Reply To ..]

I suppose it's not a benefit in the strict sense, but if you're an IC, 15% of your fees may be worth a half cent a line. A 401k is not a benefit to many MTs

And I'm not telling anyone to do anything. I'm well aware of the pros/cons benefits/downsides to IC v SE v Employee. It's good you're questioning and researching!!

losing SE status will not cause loss of home-office deductions - Snow Bunny

[ In Reply To ..]
You just have to follow specific guidelines. Go to www.irs.gov and do a search for the publication that pertains to the home-office deduction.

One important note: Do not claim the HO deduction if you are going to sell your house within the next two years.

The one exception is - MDI-MT2

[ In Reply To ..]
that you have to be able to itemize before you can take HO expenses on the Federal return. And yes, if you are depreciating any part of your home, when you sell it, that may cause a bit of a problem, unless you aren't planning to sell for 3 or more years.

Yes, indeed, that is correct (sm) - Long time MT

[ In Reply To ..]
My accountant told me that 10 years ago. If you work at home because your employer does not provide a work place, you absolutely get to deduct a home office.

BUT, you have to itemize in order to take it - see msg

[ In Reply To ..]
The only place to take home office deductions on your income tax is if you itemize and use Schedule A.

Otherwise, if you don't itemize and just take the standard deductions on your income tax, there is no where to claim unreimbursed office expenses.

Think there's also a 2% AGI threshold in there - somewhere too NM

[ In Reply To ..]
zzzzzzz

Yes, you can only deduct in excess of 2% of your AGI - see msg

[ In Reply To ..]
An MT who is an IC or SE can deduct office expenses straight up on Schedule C.

But, an employee can only include the amount that is excess of 2% of your AGI (adjusted gross income) and also ONLY if you itemize your taxes and file a Schedule A (which is the one for itemizing as opposed to just taking the standard deduction).

So in reality, very few employees will actually be able to take a deduction for unreimbursed office expenses. Because even if you itemize, you still have to hit that 2% threshold before you can deduct any of it. And the kicker is that you still can't include any of that original 2%, only the amount that is OVER that 2%.

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