With remote work becoming the new normal, many taxpayers are discovering that working from home introduces unique tax considerations. From home office deductions to multi-state taxation, it’s important to understand how to stay compliant and maximize deductions.
IRC Provisions and Key Forms for Remote Workers
Working remotely can impact several areas of your taxes, including:
- IRC §162(a) – Governs the deductibility of ordinary and necessary business expenses, including home office costs.
- IRC §280A – Defines strict criteria for home office deductions.
- IRC §871(b) – For nonresident aliens performing U.S. services remotely.
- Form 8829 – To claim home office expenses (for self-employed).
- Schedule C (Form 1040) – For freelancers and independent contractors.
- Form 1040-NR – For foreign remote workers with U.S. source income.
- Form W-2 – For employees with possible state tax implications.
Tax Considerations for Remote Workers
- Home Office Deduction (Self-Employed Only)
If you’re self-employed, you may be eligible to deduct home office expenses, such as a portion of rent, utilities, and internet.
Requirements under IRC §280A:
- Space must be used regularly and exclusively for work.
- Must be your principal place of business.
Employees working remotely generally cannot claim home office deductions under current IRS rules—even if they work from home full-time.
- State Income Tax Complexity
Working remotely in a different state than your employer’s location may trigger:
- Dual state tax filing
- Resident vs. nonresident state returns
- Risk of double taxation
For example, California may require filing even if your employer is in Texas, especially if you’re living in CA more than 9 months.
- Out-of-State Remote Work for Employers
Some states follow the “convenience of the employer” rule—notably New York. This means:
If you’re working remotely from another state for your own convenience (not employer’s requirement), New York may still tax your income.
- Foreign-Based Remote Work
If you’re living outside the U.S. while working remotely:
- Form 2555 may allow you to claim the Foreign Earned Income Exclusion (up to $126,500 in 2025).
- Must pass bona fide residence or physical presence test.
- Watch for tax treaty benefits and possible Form 1116 for foreign tax credits.
- Work-Related Expenses
For freelancers and gig workers:
- Expenses like software subscriptions, work phone, co-working spaces, and internet can be deductible via Schedule C.
Keep detailed records of all business expenses. Maintain separate business and personal finances.
Example: Home Office Deduction Calculation
Case: Maya is a self-employed UX designer working from a 1,000 sq. ft apartment. Her dedicated office space is 200 sq. ft. Her annual rent is $24,000 and utilities are $3,000.
Deductible % = 200/1000 = 20%
Total Deduction = 20% of ($24,000 + $3,000) = $5,400
She claims this via Form 8829 and reflects it on Schedule C.
Step-by-Step Guide for Remote Workers
Step 1: Identify Work Classification
- Are you a W-2 employee, 1099 contractor, or a foreign remote worker?
Step 2: Determine Eligibility for Deductions
- Only self-employed can claim home office deductions.
Step 3: Track All Work-Related Expenses
- Use accounting software or Excel with receipts and dates.
Step 4: Handle State Filing Properly
- Use tax software or a CPA to file both resident and nonresident returns if needed.
Step 5: File Correct Forms
- Form 8829 for home office
- Schedule C for business income/expenses
- Form 2555 or 1116 if overseas
Conclusion
Remote work offers flexibility—but it also adds complexity to your tax situation. Whether you’re working across state lines or abroad, smart planning ensures you stay compliant and take advantage of eligible deductions.
Call to Action
Anshul Goyal, CPA EA FCA is a licensed U.S. tax expert, enrolled to practice before the IRS, and helps remote workers, digital nomads, freelancers, and cross-border professionals Manage complex IRS and state tax rules.
Schedule a meeting with Anshul Goyal to ensure your remote work tax strategy is audit-ready and optimized.
Disclaimer
This blog is for informational purposes only and does not constitute tax or legal advice. Individual circumstances vary—consult a qualified tax professional for personalized guidance.
FAQs
1. Can employees claim home office deductions?
No, under current law, only self-employed individuals can deduct home office expenses.
2. What if I work remotely in a different state from my employer?
You may need to file a return in both states and could face double taxation.
3. How do I calculate my home office deduction?
Based on the square footage of your dedicated workspace divided by total home space.
4. Can foreign remote workers exclude U.S. income?
Yes, if eligible under Form 2555 and foreign residency rules.
5. Do I need to track all work expenses as a freelancer?
Absolutely. Receipts, logs, and categorized spending are essential for Schedule C deductions.
About Our CPA
Anshul Goyal, CPA EA FCA is a U.S. Certified Public Accountant, IRS Enrolled Agent, and cross-border tax expert serving remote professionals, startup founders, and global entrepreneurs with IRS compliance and audit-ready strategies.