Tax Guide for Remote & Work-From-Home Employees

Navigate home office deductions, multi-state filing requirements, and equipment expense rules for the modern remote workforce.

The rise of remote work has created new tax complexities for millions of workers. If you work from home as a W-2 employee, your tax situation differs significantly from self-employed remote workers. Understanding which deductions and credits apply to your specific arrangement is essential.

One critical issue for remote employees is multi-state taxation. If you live in one state but your employer is based in another, you may owe taxes in both states. Some states have reciprocity agreements that prevent double taxation, while others require you to file returns in both states and claim credits to avoid being taxed twice on the same income.

Self-employed remote workers and independent contractors have more deduction opportunities, including the home office deduction, internet and phone expenses, and equipment costs. W-2 remote employees, however, cannot claim the home office deduction on their federal return since the Tax Cuts and Jobs Act eliminated the unreimbursed employee expense deduction through 2025. Some states still allow it, so check your state rules.

Key Deductions & Credits

Home Office Deduction (Self-Employed)

$600 - $3,000

Self-employed remote workers can deduct home office expenses using the simplified method ($5/sq ft up to 300 sq ft = $1,500) or the regular method based on actual expenses.

Internet & Phone Expenses

$300 - $1,500

Self-employed workers can deduct the business-use percentage of internet and cell phone bills. Even W-2 employees can seek employer reimbursement under an accountable plan.

Equipment & Office Supplies

$200 - $2,500

Desks, chairs, monitors, keyboards, webcams, and other work-from-home equipment purchased by self-employed workers are deductible business expenses.

Multi-State Tax Credits

Varies by state tax rates

If you file in multiple states, you typically receive a credit in your resident state for taxes paid to the nonresident state, preventing double taxation.

Forms You May Need

Form 8829 — Expenses for Business Use of Your Home

Schedule C (Form 1040) — Profit or Loss from Business

State nonresident tax returns (varies by state)

Form W-2 — Wage and Tax Statement

Form 1040 — U.S. Individual Income Tax Return

Filing Tips

Determine whether you are a W-2 employee or independent contractor. This single distinction determines which deductions you can claim.
If self-employed, measure your dedicated home office space and keep it exclusive to work to qualify for the home office deduction.
Check whether your employer's state and your home state have a reciprocity agreement, which may simplify multi-state filing.
Ask your employer about an accountable reimbursement plan for home office expenses, which provides tax-free reimbursements.
Keep a log of business versus personal use of shared resources like internet and phone to support your deduction percentages.
Review state-specific rules for W-2 remote workers. States like New York have a "convenience of the employer" rule that can create unexpected tax obligations.

Common Mistakes to Avoid

W-2 employees claiming the federal home office deduction, which is not available to employees under current law through 2025.
Not filing required nonresident state returns when working remotely from a different state than your employer.
Failing to maintain a dedicated workspace used exclusively for business, which disqualifies the home office deduction.
Overlooking state-level deductions for unreimbursed employee expenses that some states still allow even though the federal deduction was eliminated.
Not understanding the convenience of the employer test used by some states, which taxes remote workers based on where the employer is located rather than where the work is performed.

Recommended Software

TaxAct handles multi-state filing at a lower price point than competitors and clearly guides remote workers through home office deductions and state allocation calculations.

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FAQ

Can W-2 remote employees deduct home office expenses?

Not on your federal return. The Tax Cuts and Jobs Act suspended the unreimbursed employee expense deduction through 2025. However, several states including New York, California, and Pennsylvania still allow state-level deductions for unreimbursed work expenses. Self-employed workers can still claim the home office deduction federally.

Do I need to file taxes in my employer's state?

It depends on the state. Some states have reciprocity agreements that exempt you. Others, like New York, apply a convenience of the employer test that may tax you even if you never physically work in that state. Check both states' rules and look for reciprocity agreements.

Can I deduct my home internet as a remote worker?

If you are self-employed, yes, you can deduct the business-use percentage of your internet bill. If you are a W-2 employee, you cannot deduct it on your federal return, but your employer may reimburse it tax-free through an accountable plan.

What if I moved to a new state while working remotely?

You will likely need to file part-year resident returns in both states. Income is typically allocated based on the number of days you lived in each state. Some states have minimum thresholds before filing is required.