Home Office Tax Deduction: Still There or Not?

Q: My son is employed but his office has been closed for almost two years. He is required by his employer to work from home. It has a dedicated space used only for this purpose. I used to prepare taxes on a VITA site and the IRS told us that an employee could deduct home office expenses. The requirement was that the use was for the convenience of the employer. I informed my son that he could claim a home office deduction under this rule. He didn’t because he found something on the IRS site that specifically says, “Employees are not eligible to claim the home office deduction.” I have attached a link. It’s titled, “How Small Business Owners Can Deduct Their Home Office From Their Taxes.” I know there have been issues with the IRS giving bad advice. But that’s just on their website. My son is not a small business owner, but the link specifically begins by saying that employees cannot deduct expenses. The site seems to apply whether you are a small business owner or not. My son considers it settled. What if it was for the convenience of the employer? Really required by the employer.

A: It’s actually kind of a trick question. The rule as you remember it continues in law. You can search for Section 280A(c)(1) of the Internal Revenue Code.

The last sentence of this quote says that an employee’s business use should be for the convenience of the employer. The pandemic is creating more of these convenience situations.

The statement on the IRS site is also true. However, the IRS statement is based on how the legal convenience rule interacts with another section of the law.

Effective from 2018 to 2025, Section 67(g) suspends all deductions for unreimbursed employee business expenses. These expenses are part of itemized deductions that were to exceed 2% of adjusted gross income.

In a broad sense, your memory of the ruler from your old VITA days is correct. Specifically, the IRS (and your son) is until the end of 2025.

When my mother was adamant that she was right, she would say, “Notice my words!” Maybe you should try that and dig up those tagged words in January 2026.

Q: I will be 72 at the end of November 2022. I also have a large IRA that I don’t need to use for my retirement needs. Because my wife and I have charitable desires, I am a perfect candidate for the Qualified Charitable Distribution (QCD) strategy. I know the strategy that allows you to transfer the required minimum distributions (RMD) to a qualified charity so you can declare no income from the RMD. This effectively allows a tax benefit of 100% of the donation. My church has a building campaign starting in June. I would like to transfer $50,000 from my IRA but have it qualify as QCD. The problem is that I am not (yet) 72 in June. Can it still be a QCD if my RMDs start the same year as the donation?

A: Section 408(d)(8) of the Tax Act has three requirements for a QCD. It cannot exceed $100,000. It must be made directly by the trustee of the plan to the qualified body. It must be done when you reach the age of 70 and a half or later.

The age requirement is clearly linked to the age of RMD when the QCD provision was enacted. Since then, the recent SECURE law has raised the age of DRs to 72 years. However, the QCD provisions have never changed.

A QCD does not have to be part of an RMD. It reduces the amount of RMD. Even before SECURE, a QCD could exceed the RMD provided it did not exceed $100,000.

Therefore, the required age remains at 70.5 years. Your general point is good – the answer is that a QCD has to be on or after you hit 70½, not just the year you hit 70½.

However, age changes for entry-level RMDs have not resulted in a similar change in age requirements for a QCD. You can do a QCD now. You could have done one in 2021, but not in 2020.

Jim Hamill is the Tax Practice Manager at Reynolds, Hix & Co. in Albuquerque. He can be reached at [email protected]

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