An increasing number of businesses are being launched with teams consisting of employees who live cities, and even states apart, and use the Internet as their main source of communication. Many of these businesses even collaborate with team members outside of the country. Creating remote teams gives businesses the advantage of accessing a much larger pool of talent than if they were restricted to choosing employees only from the general area of their physical location.
Before software like Basecamp was created, working remotely was more challenging for both the employer and employee. Today, the ease of managing remote teams is supported by an abundance of tools specifically designed for online collaboration and communication—two main ingredients necessary for success. And, thanks to the evolution of online software designed to manage and keep online teams connected, working remotely is no longer an isolating experience.
Dialpad, a company dedicated to increasing productivity through communication and collaboration, surveyed over 500 professionals across many industries and discovered that the ability to work remotely has a positive effect on employees by boosting their happiness and their productivity.
If you’re one of many remote employees enjoying your freedom, you’d probably agree that reducing your work expenses would be another great way to boost your happiness and experience freedom. The great news is you can do this through tax deductions—one of the easiest ways to recover those out of pocket business expenses.
Tax deductions for remote workers
While working remotely from the comfort of your own home gives you the kind of freedom and flexibility you won’t find in a cubicle, you’ve probably had to make some purchases for items that would have normally been provided by an on-site employer. Because those extra expenses add up quickly, many people realize they aren’t saving as much money as they thought they would. If your employer won’t reimburse you for some of these expenses, you may be able to itemize them as tax deductions.
What expenses can remote workers deduct?
The most common tax deduction for people who work from home is called the home office deduction, which consists of prorated amounts of your rent, utility bills, home repairs, and depreciation. In order to qualify for this deduction, your workspace must meet strict IRS guidelines.
Additionally, if you are a remote worker, the IRS requires that your use of the home office be for your employer’s convenience—not your own. This means that if your employer provides you with regular access to a workspace, but you prefer to work at home, you don’t qualify for the home office deduction. However, if your employer does not provide you with regular access to a workspace, then your use of a home office is considered to be for your employer’s convenience, which makes it a deductible expense.
If you don’t meet the criteria for deducting the expense of your home office, don’t worry, there are plenty of other deductions you can qualify for.
Many remote workers deduct expenses for the following items:
- Laptop computers
- Internet connection or café wifi (the wifi must be a separate, individual expense and not come free with your beverage)
- Home phone service
- Vehicle expenses (gas, oil, insurance, repairs, maintenance)
- Monthly subscriptions to work tools like Photoshop
- Training courses their employer requested for them to take
- Travel and accommodations for required meetings or conferences
How to determine if an expense is deductible
As a general rule, deductions should be made only for expenses specific to your work. If you’re not certain an expense can be deducted, ask yourself if the expense was in any way for your personal use. If not, then you should be able to deduct that expense. If you aren’t sure about what you can deduct, you can always consult the IRS official website for guidance on deductions for businesses.