Deductions on US Tax for Expat Employees Working from Home

Deductions on US Tax for Expat Employees Working from Home
April 1, 2013

If you’re one of the many individuals trading the typical cubical environment for an at-home office, then you might qualify for certain deductions on your US taxes. With technology making it easier than ever before to stay connected, many people – especially US expats – are choosing careers that offer the flexibility to work at home. Whether self-employed or not, there are certain deductions available to help reduce tax for expat employees working from home.

Do I Qualify?

Fortunately, if you use part of your home or apartment for business purposes, you are likely eligible for certain breaks on your US taxes. According to the IRS, you must meet the following two criteria:

  • Regular and Exclusive Use — a certain area of your home must be exclusively used for business.
  • Principal Place of Your Business – your home or apartment must be the primary place where business is conducted.

In addition, if you aren’t a small business owner or entrepreneur but work out of your home as an employee, you may also qualify for home-office deductions.

Types of Expenses

There are several types of expenses that may be deducted from your US taxes. Expenses are categorized based on direct, indirect or unrelated expenses. Only direct expenses, which include those expenses used for your business, can be deducted in full. Indirect expenses are those expenses required to maintain your home, such as utilities and general repairs, and can be deducted based on the percentage of your home that is used for business.

Some of these expenses may include:

  • Mortgage interest
  • Mortgage insurance premium
  • Real estate taxes
  • Casualty losses
  • Other expenses (utilities, depreciation, etc.)

A complete overview of deductible expenses is outlined in Publication 587 on the IRS website.

You’ll need to file the appropriate sections of Form 1040 based on whether you are self-employed or an employee. Additional forms may also need to be completed based on your specific circumstances.

Need Help with Your US Taxes?

We also have a video post discussing self employment’s effect on US taxes. If you have questions about your work-at-home expenses or if you would like help completing your US expat tax return, please contact us.

Every expat should know these 25 things about US expat taxes. Find out for yourself.
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