Home office tax deduction for remote employees: what are the options?

Can employees get some tax returns because they partially or fully work from home? It depends on their country of residence’s regulations. European governments offer home office tax deductions for remote employees, some more than others. In the U.S., it’s a bit more complicated. 

As a finance manager, knowing the rules of business use of home deductions is crucial to assist your colleagues better. Some team members might ask you directly about their rights and tips. Others might talk with the HR department first, which might then come to get information from you. For most people, this is the time of year when they would gladly hire somebody to fill in their tax forms. Some actually do. However, for those who don’t, it’s time for serious calculations, and working from home doesn’t help. Well, it might help your wallet, but it doesn’t simplify your tax declaration process.

So, let’s see what type of expenses remote workers can claim, if they are entitled to, and if not, what businesses can do to compensate for the working-from-home costs.

Which countries consider remote work-related expenses in their taxation systems?

Remote work tax deductions in the U.S.

In the U.S., only independent workers are allowed to write off business expenses on their tax forms. The Tax Cut reform 2018 has ended remote work tax deduction advantages for regular employees. . Until 2025, there is little chance of any changes. However, some organizations try to counterbalance this shift by compensating with different means. 

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Home office tax deductions for European employees

In Europe, it is the other way around. As more businesses include flexible work arrangements in their working model, governments allow more tax deductions for remote employees. Yet, it is very different from one country to another, though. While Belgium appears as a model in this sector, Portugal, Spain, Italy, and Poland still have to improve. 

You can read our article about remote work tax deductions for European and American employees for more detailed information.

Taxation benefits for remote team members in other countries

Do you live in Asia, Africa, or South America? Internationally, the right to deduct home office expenses varies significantly from country to country.  For example, the South African government allows remote workers to write off their home office expenses according to specific requirements. However, Japan hasn’t yet updated its taxation system on this topic. 

While working remotely has become a norm worldwide, some governments take more time than others to get along with this new way of working.

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What home office expenses examples could remote workers write off on their income taxes?

Energy bills

Allowing employees to work from home has plenty of benefits, both for employers and team members. However, this can have a heavy impact on your staff’s personal bills. Energy expenses are the perfect example of why people working from home should be entitled to deduct a part of these costs. For instance, electricity and heating costs considerably increase when working from home. 

In countries that enable remote workers to write off their home office expenses, the proportional cost of these expenditures used for business purposes can be claimed.

Equipment costs

Other businesses’ use of home expenses includes work equipment. Letting employees work from home or asking them to do so may require them to invest in furniture or materials to create a proper working space. 

For example, they might need a desk, a working chair, or noise-cancellation headphones to attend virtual meetings. These are also costs that can be written off their tax form. 

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Cleaning expenses

Companies are paying third-party providers to clean the office space, so why would remote workers have to pay with their money to clean their home working area? Organizations benefit from flexible work arrangements as much as workers do. You can read our article about the advantages and disadvantages of remote work from employees’ and employers’ points of view to dig more into this topic. 

Consequently, cleaning expenses are also to be acknowledged when it comes to team members’ costs of remote work.

Real estate costs

Imagine that a couple working in different businesses is now required to work from home three days a week. This means that a big chunk of their apartment will be reserved for their jobs. Their companies might downsize their office space and save on office costs, but now they have to pay for these charges. A part of the money they spend on their rent or real-estate loan is paying for a room dedicated to work. 

Many governments consider this aspect and entitle remote employees to deduct these expenses from their taxation forms.

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What is the tax return deadline in your country in 2023?

Which team are you on?  Is it the one that fills out its tax form at the last minute, or do you do it immediately to get rid of it? No matter which one you are on, knowing the tax return deadline is the most important thing.  If your staff is looking for this information, here is a table to share with them that summarizes the tax return deadlines per country. Of course, we can’t indicate the tax return time limits of the 195 countries in the world, this article would be way too long. So we have focused on the countries our users come from.

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How can organizations compensate when there are no home office tax deductions for remote employees?

Let’s say your government doesn’t apply remote work tax deductions or your team members are not entitled to it for reasons X, Y, and Z. An employee-centric approach that some businesses use is to provide alternatives. Here are some ideas you can implement to counterbalance your staff's home office expenses.

Create and give your staff a home office expenses form

According to your long-term financial strategy, a solution to overcome the lack of tax deductions for business use of home expenses is to reimburse your staff for these costs. You can create a home office expenses form as you would do for any other costs. Your team members can fill it in monthly or quarterly, for example. You can then directly compensate them for these costs on their next payslips. 

Decide on a monthly stipend to compensate for any remote work costs

Another method is to assess how much working from home costs your workforce and set a fixed amount of money you add to their salary, for example. This monthly (or quarterly, or yearly, it’s up to you) stipend should at least include energy, equipment, cleaning, and real-estate costs. Conducting a survey among your staff can be a great idea to determine the expenses that should be taken into account.

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Participate in the coworking space monthly price

Remote work doesn’t necessarily mean your team is only going to work from home. It can also be that they feel more productive when booking a desk at a coworking space. Although you both benefit from letting staff work flexibly, they shouldn’t have to pay for a place to work. If some of your colleagues prefer that option, paying for their subscription to these types of third workplaces is undoubtedly an employee benefit to add to your list.

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Flexible work reshuffles many aspects of our personal and professional lives, including taxes. We hope this article gives you clearer insights into home office tax deductions for remote employees and how to cope with them as a company. Governments are adapting to these new business use of home expenses, although some are faster than others. Yet, as an organization, home office compensation should become part of your financial strategy and knowing where to cut costs. 

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Sources:

• 7 Great Perks To Include in a Competitive Remote Employee Benefits Package, We Work Remotely;
• Remote work tax deduction: key info for European and American employees, deskbird. 

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