Working from Home in 2021 Due to Pandemic

[Mochina]

My 23-year-old son was employed as a college advisor to high students in Oregon during 2021, and because of covid-19, he worked mainly from his studio apartment.  Based on TurboTax Deluxe's criteria for a home office, he qualifies since he worked more than 15 days per month in the home office for 11 months.  We would like to claim a home office for him using the square footage method + his monthly Internet charges, but I am worried about this claim triggering an audit.  Even in pandemic times, does this audit trigger still apply?  Also, if we do claim a home office, in response to Turbotax's question about the total income earned using the home office, do I indicate 100% of his salary, or do I enter a lesser % based on deducting the % of time (approximately 14%) that he was able to work on high school campuses and at his non-profit organization's office?  

[MaryK4]

If he was a W2 employee, he cannot take the home office deduction in 2021 (there is no Unreimbursed Employees Expenses this year).  However, if you live in Alabama, California, Hawaii, Arkansas, New York, Pennsylvania, and Minnesota, you can still claim some of these deductions when you file your state taxes this year.  

The most important thing to remember with the Home Office deduction is to check the state requirements- for the IRS, the office space claimed must be regular and exclusive.  The exclusive part means no other personal activity can occur in the space- so have it well defined. As long as you keep the receipts of payments with your tax records, you will be okay if you are audited,  Definitely use the percentage of time for working in the office as well.  

[Mochina]

Thank you Mary K for your response. Since my son is a W2 employee, I understand now that he can't take the home office deduction for 2021, but I don't understand why TurboTax bothers to ask him all the home office questions when it "knows" that he is a W2 employee?  We haven't done the California state tax return yet, but we will use TurboTax. Does TurboTax transfer the home office info from the federal to California?  Will the California rules be applied automatically by TurboTax or do we need to do our own research? For example, preliminary research of the CA rules indicate that a home office deduction is only "allowed based on the percentage of the home that is used “exclusively and regularly” for business purposes and meets one of three IRS qualifications." So since my son's home is a 400 sq foot studio apartment, he doesn't have any part of his apartment that is exclusively a home office so I assume that he will not qualify for a CA deduction either.  Turbotax did not make it clear that the IRS requires exclusive space for a home office.  To make the situation clearer, should I go back into TurboTax and just omit all the references to my son's home office? 

[Bluemalibu]

  I likewise qualified to claim the home office deduction, and claimed it.  My income was a pittance...  Less than $40,000.  Hardly a prime target to go after, yet I was audited due to the home office deduction.  I sat through two, eight hour days of grilling at the IRS office, after which the auditor found my deduction to be valid.  It still cost me two days of work and a lot of aggravation.

  ...That being said,  as of Feb 18th, 2022, the IRS is currently 6 million returns backlogged.  So, who

knows?

[Mochina]

Bluemalibu, I appreciate your response regarding your experience.  I don't think it will be worth it to claim the home office deduction. 

[MaryK4 · Accepted solution]

For California, it is an itemized deduction, so if you use the Standard deduction it will not apply.  You can also only deduct the expenses that excess 2% of your federal adjusted gross income.  

Based on his current situation, it is highly unlikely he will be able to take advantage of the deduction.

TurboTax still has the Home Office deduction in the federal section because the Employee expenses is not available for tax years 2018 through 2025, so it may come back.  

@Mochina

[erikbeer]

My wife has been tele commuting the last 21 month . Her employer is LA County. Please show how to deduct our "tele commuting office" in our home.  

[PattiF]

Assuming that you are California residents, your wife is eligible to deduct unreimbursed employee expenses.

If you live in one of the states that still allow employee business expenses as a deduction, you would enter this in the federal return, and the information will be transferred to your state return.

Here's how to enter the information:

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Employment Expenses
• On Job-Related Expenses, click on the start/update button
• Once in this section, you can enter union dues and any other employee expenses.

@erikbeer