How Will Working from Home Affect My Taxes?

Windham, NH Resident Seeks Advice

Employees working from home are no longer able to deduct business expenses, as this deduction was eliminated in 2018.  Only self-employed individuals can qualify for home office deductions.  Self-employed workers can claim either $5 per square foot of home office space up to 300 square feet, or a percentage of the home and costs to maintain it as a deduction.

A Windham resident was working from home as a result of the COVID-19 pandemic.  Looking for a silver lining, she contacted Merrimack Tax Associates to inquire about how this might save her money on taxes.

W-2 Employees No Longer Qualify for Home Business Deductions

The lucrative home office deduction is no longer available for W-2 employees, effective for tax year 2018.  Even in the current situation, where many workers have had their offices shut down and have been forced to set-up a makeshift office from home, this designated space is not tax-deductible.  This home office deduction is instead designated to those self-employed individuals only.

A Savings on Income Tax May Be an Option

New Hampshire is an income-tax free state, where those working here can typically enjoy an additional 5% or more of their income.  Those that live in New Hampshire but work out of state will are required to pay their state of employment’s income tax.  The exception to this is days working from home.  New Hampshire residents that work in a state with an income tax and have been working from home during the pandemic, may be able to recoup some or all of the income tax that was deducted at the end of the year.

Documentation is necessary to accompany this deduction, including a detailed outline of days working in New Hampshire, presumably from home, and days worked out of state.  Vacation, personal days and sick time do not qualify as deductible.

The Windham resident was working in Boston until the pandemic.  By working from her New Hampshire home, she should be able to reclaim the income tax paid to Massachusetts during that time.