Working from home is a convenience employees don't want to surrender, according to recent poll. Conducting business from your home is still an option is you're self-employed, and you also might be able to claim the home office tax deduction.
Among the slew of presidential actions taken by Donald J. Trump since his return this week to the Oval Office was an executive order demanding federal employees return to their offices.
The brief directive says —
“Heads of all departments and agencies in the executive branch of Government shall, as soon as practicable, take all necessary steps to terminate remote work arrangements and require employees to return to work in-person at their respective duty stations on a full-time basis, provided that the department and agency heads shall make exemptions they deem necessary.”
WFH time over: Working from home, or WFH, became ubiquitous during the COVID-19 pandemic and helped many people and their companies survive the coronavirus’ economic downturn.
But now, most private companies have started making their employees return to the office. Uncle Sam’s thinking, at least per the new Trump administration, is that a similar employment situation should apply to federal workplaces.
Plus, the sorta official but nongovernmental Department of Government Efficiency (DOGE), now led solely by billionaire and Trump pal Elon Musk, believes making a five-day work week a requirement for all federal employees will help meet the DOGE goal of cutting federal spending.
Specifically, Musk has vowed to cut $2 trillion from the current $6.75 trillion federal budget. Reducing company head count a la his takeover of Twitter/now X is one of his favorite methods.
There are 1.3 million federal workers approved for telework, according to Office of Personnel Management (OPM) data. Government information also shows teleworking federal workers spend 60 percent of their time performing work in person.
If some of those WFH federal staffers decides instead to quit rather than returning to full in-office status, that will shave some of the government's operating expenses.
No work if no WFH: The forced attrition might just work if federal employees follow what a recent Pew Research Center found.
Among employed adults who have a job that can be done from home, 75 percent are working remotely at least some of the time, according to a recent Pew Research Center survey.
Nearly half of workers in this group, or 46 percent, say that if their employer no longer allowed them to work from home, they would be unlikely to stay at their current job, writes Kim Parker, director of Social Trends Research for Pew Research, in her analysis of the survey.
The probably-would-quit group includes 26 percent who say they’d be very unlikely to stay, notes Parker.
The Pew Research survey also found some groups of workers are more likely than others to say they might leave their job if their employer no longer allowed them to work from home.
- Women are somewhat more likely than men to say this (49 percent vs. 43 percent).
- Workers younger than 50 are more likely than older workers to say this (50 percent vs. 35 percent).
- Workers who currently work from home all the time are more likely than those who do so most or some of the time to say this (61 percent vs. 47 percent and 28 percent).
Home office deduction requirements: Not only did COVID-19 change work patterns, it also taught many WFH employees an unwanted tax lesson.
In most of these situations, they learned that while the home office tax deduction was available, it didn’t apply to COVID-displaced employees working from home.
The key here is that they workers were still employees. The Internal Revenue Service is clear about this, saying when the question arose during the pandemic that “employees are not eligible to claim the home office deduction.”
That’s the law under the Tax Cuts and Jobs Act (TCJA) of 2017, whose changes included eliminating the itemized tax deduction claim by employees for unreimbursed business expenses, including those for a home office as long as it was for the convenience of the employer. The TCJA is in effect through 2025.
The home office deduction, however, still can be claimed for those who are self-employed, either full-time or who have side hustles to supplement their employee wages.
My previously cited post on disappointed WFH employees during COVID has more on the tax code requirements to claim the home office deduction. But here’s a look at the two big hurdles your home office must clear for the IRS to okay your home work space claim.
First, the home office area must be used regularly and exclusively for business. It doesn't have to be a separate room; a portion of room designated for work use only counts. But regardless of how large or small, the room or area cannot be used for personal tasks, too.
Secondly, your home office must be used as your principal place of your business. This is possible even if you conduct business outside your home, for example, to meet with clients, as long as you use your home substantially and regularly to conduct business.
There’s also a simplified home office tax deduction that many find works well for their self-employed situations.
Finally, you also might find these other business and home office posts of interest:
- Being the boss tax basics
- Tax implications of business entity choices
- Work from home pros, cons and home office tax tip
- How ordinary & necessary expenses become tax deductions
- Profit motive is critical to sustain business tax deduction claims
- The eventual, and often unexpected, tax cost of home office depreciation
- Homeowner's insurance is sort of tax deductible in some home office instances
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