It’s importance noting that the change does not affect the self-employed — i.e., freelancers and independent contractors — who work from home. That bunch can carry on with deducting qualified business expenses. They also might benefit from the new 20 percent reduction on qualified business income for a broad swath of small businesses and solo operators.
The ranks of employees who work from available at least half of the time have been growing, with 115 percent growth between 2005 and 2015, according to a 2017 appear by Global Workplace Analytics and Flexjobs. Nevertheless, they still comprise only about 3 percent of all U.S. workers, or minute to 4 million employees.
Before the 2018 tax year, anyone who itemized their deductions could also get a tax break for traditional miscellaneous expenses (which included unreimbursed business expenses) that exceeded 2 percent of their adjusted disgusting income.
For remote workers — who shoulder the cost of running a home office — that threshold was more easily crossed because they could withdraw a portion of expenses like their mortgage, utilities, property taxes and maintenance, along with other job-related expenses that were not reimbursed by their company.
And while the new tax law nearly doubled the standard deduction and reduced marginal tax assesses across the board, telecommuters might not come out ahead, depending on how sizable that previous tax break was for them.
If you turn you’re among that group, you can try to mitigate that increase in the cost of doing business from home by approaching your boss. For instance, you could ask for a bump in pay to compensate for the loss of the tax break, or ask to be reimbursed you job-related expenses that you previously wrote off on your rates.
You also could ask your company if you can become an independent contractor. However, even if your employer agreed, you’d beget to weigh the loss of benefits that can come with being a full-time employee — say, health insurance, vacation every now or access to a retirement plan — with that move.
Additionally, you’d have to pay self-employment taxes, which means picking up the percentage of Medicare and Social Security taxes that your company pays on your behalf, said Bill Smith, regulating director at CBIZ MHM’s National Tax Office in Washington.
And if you think of setting up a side gig simply so you can funnel your home-office expenses in the course that, you need to be sure it’s a valid business in case the IRS comes calling.
“If you do set up a side gig and it doesn’t have a legitimate issue purpose, that’s tax evasion,” Weston said.
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