Remote work tax deduction: key info for European and American employees
May 9, 2023
September 26, 2024
The tax season has started for most countries worldwide. Since many employees have embraced flexible work policies, they might come to you wondering about remote work tax deductions. Can they claim a tax break because they work from home half the time? Can they get a tax write-off for their electricity, Internet, and heating bills? Is requesting a remote work tax relief worth it?
For most people, taxes are a brain breaker 🤯. If we have to be honest, we know this is not the most appealing topic ever. Nevertheless, we have gathered all the relevant questions your hybrid team members will likely ask before submitting their tax return forms. Always aiming at creating a more employee-centric and positive work environment, this article will help you give them clear and easy answers.
There are, however, different tax laws and systems in each country, state, and sometimes even city. In our research, we have mainly focused on U.S. and European tax policies. If you have any questions or need additional information, please consult a tax specialist in your country.
How does remote work tax deduction work in the U.S.?
The 2018 Tax Cut Law: a downer for W-2 employees
The U.S. tax system isn’t really in favor of remote staff members. Since the Tax Cut reform in 2018, W-2 employees can’t write off home office expenses from their tax forms. In other words, workers who received a paycheck or a W-2 exclusively from a company are no longer eligible for claiming a tax break.
However, if some of your coworkers are hired with a freelancer's contract and sometimes work from home, they are entitled to an exemption on their taxable income. In this case, they can choose between two tax deduction systems: the simplified vs. the regular method.
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The two tax deduction options for other remote workers in the U.S.
Regular tax deduction method
Self-employed people can deduct a percentage of their eligible home office expenses according to the size of their workspace. For example, if their office corner represents 10% of the total surface of their flat or house, they can then claim 10% of their eligible costs. This is the regular tax deduction method. It implies that they record all expenses and save every receipt.
Simplified option
The previous method can be more worth it than the simplified option. However, it requires discipline and time to calculate everything and complete all the paperwork (except if your freelance staff hires tax professionals to do it for them). The “easy” option enables freelancers to deduct $5 per square foot of office space. The limit is 300 square feet and $1500.
Specific case for employees who work and live in different states
Let’s say some remote team members live in Oregon, but your company’s headquarters are in California. Which of the tax law is then applied? How to avoid paying in both states? For these employees, filling up a nonresident tax form is crucial. Then, they can credit the taxes paid in their “working” state against their living state’s tax liability. It can also be done the other way around, according to which state has the highest tax rates. Does it sound complicated? It’s normal, and your staff might feel overwhelmed too. This is why the best option is often to contact tax specialists for advice or to let them take care of everything.
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Can remote European employees benefit from home office tax write-off?
Italy, Spain, Portugal, and Poland: governments still have a lot to do to support remote workers
For Italian, Spanish, Portuguese, and Polish remote employees, there is (so far) little to no possibility of remote work tax deduction. The governments of these four European countries are encouraging businesses to compensate their workforces, but it is not mandatory. Some of them, like Poland, have recently worked on creating a new law enabling staff members to deduct some of their remote work expenses. Since April 2023, Polish companies have been required to pay their employees a monthly allowance. However, although the amount is tax-deductible, it is still unclear how much employers should compensate their coworkers.
Germany, France, Netherlands, Austria, Ireland, and Greece: tax offices entitle employees to deduct their home office costs
The amount remote employees can deduct from their taxes varies from one European government to another. But in opposition to the countries mentioned above, many others have adjusted their labor laws to the adoption of more flexible work. Germany, France, Netherlands, Austria, Ireland, and Greece usually offer a daily or yearly compensation fee. Here is a table to better understand each country's remote work tax deduction advantages.
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Belgium: the most advantageous country for remote workers’ tax deduction in Europe
The Belgium home office tax deduction system is so far the best among all the European countries mentioned in this article. Remote employees are entitled to a weekly amount of €142.95 as soon as they perform a minimum of one working day at home, and their organization grants them their benefits. In total, it is an extra €1715.40 that team members can receive without being taxed on it. Another advantage is that this remote working day can be split and scheduled to match workers’ needs. For example, they can work two half-day per week at home or take all their allocated home office days the same week.
How can businesses support their remote workers with their home office expenses?
Create a database with all the most frequently asked questions (FAQ)
When you want to be supportive and help your employees with taxes, the first step is to create a database that answers the most common queries. Some of the responses remain valid from one year to another. Others become obsolete. It is critical that you keep your FAQ system updated and accurate. A few weeks before the tax season starts, ask your staff to share all the questions that come to their mind on this topic. You can also include additional questions that haven’t been highlighted. Your advantage is that you know their profile best and can adjust the FAQ accordingly. You then have some time to gather the answers and best practices to adopt regarding taxes.
Provide free support from a tax specialist when the tax season comes
Except if some of your team members have a hidden passion for numbers, filling up tax forms isn't usually perceived as an enjoyable moment. You can support your employees in multiple ways to make this imperative task easier. For instance, some tax preparation software exists. Let your staff know about it and recommend a list of the most trusted ones. But if you want to go the extra mile for your team, advise them to get help from a tax expert and offer them to pay some of the consulting fees. Your employees will appreciate this gesture for sure!
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Be fair and take charge of some of your remote employees’ expenses
Flexible working arrangements benefit employers and workers. For organizations, saving money on real estate, bills, and other expenses is a great opportunity. For team members, it enables them to find a better work-life balance. However, it can also increases some of their living costs, such as electricity bills. Businesses can adopt an employee-centric approach in countries where a remote work tax deduction is not applicable. They can compensate their remote staff and make it part of the company’s benefits. It helps foster a positive corporate culture, boost employee experience, and enhance overall satisfaction.
Remote work tax deduction remains a recent topic for governments; obviously, there will always be room for improvement. The 2018 U.S. Tax Cut Reform is valid until 2025. Hopefully, a more advantageous system will be put in place afterward. Europe, Spain, Italy, and Portugal are late regarding home office tax write-off policies. But these countries are most likely to adjust on this topic too. Germany, France, the Netherlands, Austria, Ireland, Greece, and Belgium have adapted to the new ways of working and established tax benefits for remote employees. No matter where your company’s headquarters are located, supporting your staff when the tax season starts is part of being employee-centric. Not only can you remain available to answer their questions, but you can also create an FAQ database or hire a tax expert. Lastly, you can provide them with remote work compensation if no tax deduction is possible.
Before you leave this page, we have one last question: are you happy with your hybrid workplace management system? Are your team members satisfied with it too?
If not, request a free demo of the deskbird app to discover how we help you optimize your workspace, coordinate hybrid work schedules, and much more!
Sources:
- Working remotely? Here are 4 things to pay attention to this tax season, CNBC;
- Tax Tips for Employees Who Work at Home, Intuit Turbotax;
- Tax relief - how different European countries tax working from home, N26.
