Working from home

Joe,
I want to work from home, but not sure if my employer would go for it. What’s in it for the company? And, if they do let me work from home, what can I deduct on my taxes?
-Patrick, Minnetonka

Thanks, Patrick.  Those are two great questions that I hear a lot.

To answer your first question, there are many benefits to your employer to let you work from home. You would be happier—and more likely to stay on the job—for one. And, believe it or not, more productive. Studies show that employees who work from home show a jump in productivity. Also, your working from home will help a company work on their, to use a fancy buzz-term, corporate contingency plan. That is just a fancy way of saying their plan if a situation or disaster occurs. Say everyone gets swine flu or a hurricane hits.

While it many not apply to you, companies are also interested in allowing employees to telecommute because it expands their pool of available talent.
But before you get too excited about working from home, let me answer your second question. As all things government, the rules for tax deductions are complicated and intimidating.

In order to make any deductions as a telecommuting employee, you must first prove that your working from home is for the convenience of your employer, not simply for you. The above stated advantages provide good ways to show the convenience (profit!) of you working from home.
Next, you need to make sure you are deducting valid expenses.  There are direct expenses, relating to the home office such as painting the office or buying furniture for the office, and indirect expenses, items on the periphery such as electricity, taxes, or interest. You can deduct direct expenses, and the business-use part of indirect expenses for one of two reasons:

1) The part of the home where you work is used exclusively for work
2) You use the space to meet with customers or clients

Of course, the expenses you deduct can’t add up to more than you made in the course of business.

Finally, if you work both at home and a central office, you still may deduct expenses if the majority of your work is done from home. For instance, if a journalist does most of his writing from home, but goes to the office for meetings, he may deduct his expenses incurred at home and his traveling to the office.
Hope that clears up your question, Patrick. If you have any more questions don’t hesitate to ask.

photo credit: Yasuhiko Ito

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