Top Tax Questions About Working Remotely
Last spring, many of us were asked to leave the office and begin working remotely from home. If you were one of them, you know that presented a lot of issues to be solved as you juggled work and family, including children now dealing with online school. It continues to be a tumultuous time!
Now, with tax season upon us, there are tax implications of working remotely that you may need to address. So, our friends at TurboTax® are helping us take a look at the tax issues of remote employment.
What tax issues? I still pay tax on my income, right?
Yes indeed. The income from your job will be reported to you on a W-2 for 2020, and you’ll report that income on your tax return. Nothing there has changed, at least for the federal tax return. But you may have special tax issues to deal with when you file your state income tax return unless you live and work in a state that has no income tax.
What’s different about state returns for remote employment?
If you live in the same state in which your employer is located, state taxes are pretty straightforward. But when the pandemic hit and commuting to the office became a thing of the past, many people left urban areas and moved to the less-populated country where it was less expensive to live. If you crossed state lines to do that and now live in a different state from your former office, you may be dealing with the income tax rules of two states, not just one.
Do I owe taxes to both states? Good question – it depends.
Most states look to your physical presence in determining whether to tax you. If that’s the case, if you live and work in one state for an employer in another state, you will only owe tax to the state in which you live and work. But each state is different, so be sure to use tax preparation software such as TurboTax® that considers the facts and circumstances of your employment situation in light of the tax laws of the states involved.
Can I deduct the costs of working from home, such as my computer, internet, office furniture, and supplies? Probably not.
Unfortunately, the tax act passed at the end of 2018 axed those deductions for most employees, with the exception for teachers that allows them to deduct up to $250 for supplies used in the classroom. If you aren’t entitled to a deduction for your expenses, your best bet is to ask your employer to give you a non-taxable reimbursement for those costs.
If you are looking for reliable tax preparation software or advice, TurboTax can help with simple to complex tax questions. And when you need help, real experts are standing by — and can even do your taxes for you, start to finish with TurboTax Live®.
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The information in this article for general educational purposes only and not intended to provide specific advice or recommendations. Please discuss your particular circumstances with an appropriate professional before taking action.