These 7 states might give you a tax break for work-from-home costs (2024)

FAQs

These 7 states might give you a tax break for work-from-home costs? ›

Alabama, Arkansas, California, Hawaii, Minnesota, New York and Pennsylvania all provide a deduction for unreimbursed employee business expenses on their respective state income tax returns, he said.

If you work from home for part of the year, only include expenses incurred during that time. Under the simplified method, you deduct $5 for every square foot of space in your home used for a qualified business purpose. Again, you can only claim the deduction for the time you work from home.

For employees living in Alabama, Arkansas, California, Hawaii, Minnesota, New York and Pennsylvania, though, "there is a silver lining," Rigney said. These seven states let their residents deduct unreimbursed employee business expenses on their state income tax returns.

Your home office generally will qualify as a principal place of business if: • You use it exclusively and regularly for the administrative or management activities of your trade or business, and • You have no other fixed location where you conduct substantial administrative or management activities of your trade or ...

Internet bills are one of the work from home tax deductions self-employed individuals can take. Utilities are considered a home business tax deduction. When deducting a cell phone for business, you can only write off the business use portion.

The home office deduction, calculated on Form 8829, is available to both homeowners and renters. There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

Home-office expenses eligible for a California tax write-off can include desks and chairs, as well as a portion of your rent, utilities, homeowner's insurance or renter's insurance and repair and maintenance costs.

The IRS offers a simplified home office deduction for those who prefer a simplified approach. Instead of calculating actual expenses, you can use a standard deduction based on the square footage of your home office. As of the last update in 2022, the rate is $5 per square foot, up to a maximum of 300 square feet.

Cons of a Home Office Deduction

The portion of the gain attributable to the home office use would be subject to capital gains taxes, which may result in a tax bill higher than any savings the homeowner may have seen from the home office deduction, depending on the size of the capital gain.

If you purchase a computer for use in your business, deducting the whole cost is no problem. Usually, you can deduct the entire cost in a single year instead of depreciating it over five years.

Can I write off my mortgage if I work from home? ›

Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements.

To qualify, you must meet any one of the following requirements: your home office is your principal place of business. you regularly and exclusively use your home office for administrative or management activities for your business and have no other fixed location where you perform such activities.

If you're eligible, you may be able to deduct a portion of your homeowners association fees, utility bills, homeowners insurance premiums and the money you used to repair your home office. The amount you can deduct depends on several factors, including the percentage of your home that's used exclusively for business.

You'll file as a resident for the state where you live, and if the work state withholds taxes, you'll file a nonresident return for the state where you work.

One way to calculate the business use percentage is to take the total amount of hours you use the internet for work purposes divided by the total amount of hours in the month. You would multiply that percentage by your monthly internet bill to determine your deductible amount.

Share: You can qualify for a cell phone tax deduction from cell phone charges incurred when the mobile phone is being used exclusively for business. There is not an IRS cell phone deduction for self employed people, exclusively. However, you can also deduct additional business expenses that you incur.

The IRS offers a simplified home office deduction for those who prefer a simplified approach. Instead of calculating actual expenses, you can use a standard deduction based on the square footage of your home office. As of the last update in 2022, the rate is $5 per square foot, up to a maximum of 300 square feet.

Generally, income can be taxed where you live and where you work. If those are the same state—as is typically the case with remote and in-person workers—then that's where you'll get taxed (with one exception; more on that below).

If you purchase a computer for use in your business, deducting the whole cost is no problem. Usually, you can deduct the entire cost in a single year instead of depreciating it over five years.