Is there a limit to how much home office equpiment I can write off.?

Question

My fiancee now works from home in MA. for a company based in NJ. The stipulation when she relocated was that she still had to file taxes in NJ. Can she still write off purchased home office equipment even though they have her on the books as a regular employee that still shows up to the office everyday? If so is there a $$ limit to what she can claim?

Answer 1

Neither the employer nor employee can stipulate how state taxes are filed.  If she resides in MA she will pay MA income taxes.  

How the company records her employment status does not determine what deductions she can take.

There are very restricted limits on the deductions she can take for an employee office in home.  These deductions are explained in IRS Pub 587 available at irs.gov.

The deductions for expensing or depreciating equipment can be taken only after deducting most of her other expenses, such as mortgage interest and taxes for the business use of her home (if she qualifies), business telephone, supplies, insurance, utilities, etc.   Only after these expenses have been deducted from her income associated with her home office can she deduct equipment.

Further, deductions for equipment cannot produce a loss for her.

And lastly, since she is an employee, these deductions are limited to the excess of 2% of her adjusted gross income.  The deductions will benefit her only if she itemizes her deductions on Schedule A.

The above is a very general description, see the IRS worksheet in the publication cited.

Answer 2

Ninasgramma said it very well - good description of what state you pay (neither you nor company get to just choose) and about how to deduct the employee expenses - but I would like to add something.  When you are reading through the publication she cited, be sure to keep in mind that you are an employee and not a self-employed person taking home office expenses.  Very, very seldomly can an employee even take home office expenses because of one qualification you will see.  An employee can only take the home office expense if it is for the employer's benefit, which usually is interpretted as that the employer does not have an office space for her.

So an employee can NOT take home office expenses if they are doing it just so they can take some work home with them at night.  That is for the employee's convenience, not for the employer.  The only employees that usually can take home office expenses are those who work for companies that don't have an office in that employee's area - like sales rep who rep products to manufacturers in their area for a nationwide company.  Most of the time, those companies have a sales office or two, but their sales reps work out of their home to cover the rest of the areas between those offices.

Answer 3

No

Answer 4

hello - I'm not sure, but i think that's illegal for her to do as well as for the company to ask it.  i think you have to pay taxes from the state to work in as well as the state you live in.  i live and work in the tri state area and have to track carefully what days i am in the NY office (my main one) and days I am in NJ or CT offices and file taxes accordingly.  In addition, I may not say my office is in NJ when I have an office in NY City.  I did try to look this up for you, but cannot find a good site to get an answer to this.  personally i would ask a CPA, its worth the cost to make sure you are in complaince with the law.  good luck