You Can Deduct That? 6 Surprising Tax Deduction Tips for Telecommuters

Working remotely offers professionals quite a few perks. No commuting, a comfortable office space and less stress are typically what comes to mind. But what about the tax benefits of working from home? Those exist, too! Let’s review some of the more surprising tax deductions that telecommuters may be able to claim and how each of them works.

Home Office Space

Many people still see the home office deduction as a potential red flag for auditing, but as telework continues to grow in usage, this is no longer the case. As long as you can meet the IRS criteria for the home office deduction, you don’t need to worry that taking it puts you at higher risk for being audited. Below are some of the home expenses that you may be able to deduct as part of the home office deduction based on the portion of your home used for business.

1. Property Taxes: If you work from home, and you own the home, a percentage of your property taxes can be deducted as part of the home office deduction. The percentage is based on the percentage of space in your house (in square feet) used for your work, and it must be used exclusively for that purpose.
2. Mortgage Interest: Just like property taxes, if you own your home and pay mortgage interest, you may be able to deduct a percentage of that cost as part of your home office deduction. Calculate the size of your home office (or the space in your home from which you work) and what percentage of your overall house size that space takes up.
3. Utilities: Now we’re starting to sound a bit like a broken record, but a percentage of the cost of your utilities like heat, electricity, and internet, can be deducted as part of the home office deduction, too. The IRS also allows you to take a “Simplified Home Office Deduction” that gives you a flat deduction of up to $1,500 based on $5 per square foot up to 300 square feet.
4. Office Décor: Furniture used in your home office (desk, chair, table, lamp, artwork, etc.) can be deducted, as can improvements like painting, floor refinishing, and other remodels. Again, it’s all about the use of the space–if you’re using it solely for business purposes, it’s deductible.

Foreign Earned Income Exclusion (FEIE)

Here’s a tip that applies to you if you live abroad and work remotely outside of the United States. If you’ve made foreign earned income, you may be able to exclude a certain portion of your income from U.S. tax. Not sure if you’ve made “foreign earned income?” Here’s how the IRS defines it: “foreign earned income is income you receive for services you perform in a foreign country during a period your tax home is in a foreign country and during which you meet either the bona fide residence test or the physical presence test.”

Don’t worry about knowing these tax rules if you are a telecommuter. TurboTax will ask you simple questions and give you the tax deductions and credits you deserve based on your answers.