Do Employers Have to Pay for Home Office Expenses?

Employees work from home now more than ever before. But working from home isn’t without its own costs. Do employers have to pay for home office expenses?

Employers in the United States aren’t federally required to pay for home office expenses unless an employee’s expenses are causing their pay to fall below minimum wage. Some states require employers to reimburse remote workers. 

In today’s strange working climate, you’ll want to be equipped with all the knowledge you can get regarding costs and expenses. Read on to learn all about how employers are handling remote workers’ work-from-home expenses.

Real quick: before we get too far along here, if you want to get more great ideas for your gaming room or home office and connect with other home office hackers to make your space the best join my free private Facebook group, Home Office Hacks here.

Is My Employer Required to Cover My Expenses if I Work from Home?

Working from home is great. There are plenty of advantages to working from home versus commuting every day. However, there are expenses that come along with a remote work arrangement.

And, an employer is not federally required to cover work expenses when you work from home unless your expenses put you below minimum wage. Some states do require it, though (we’ll talk more about that in a minute).

In the past (before the Covid-19 pandemic changed the world forever), working from home was seen as a privilege. Those who got to work from home were lucky and few.

Typically, those who got to work from home didn’t expect to have their employee expenses reimbursed simply because they were grateful for the tradeoff.

Then, when a virus began spreading rapidly across the globe, working at home became a necessity. When employees HAVE to work from home, we’re forced to look at business-related expenses in a new light.

What Expenses Should My Employer Pay if I Work from Home?

While employers aren’t required to pay for the expenses of remote workers, make sure you know your own employer’s expense reimbursement policy. It’s possible that your employer is willing to reimburse certain job expenses.

Some employers might even agree to reimburse additional home office expenses such as office furniture. However, some employers may argue that items like desks and office chairs will have uses beyond an employee’s remote work.

Can Employees Get Reimbursed for Work at Home Expenses Incurred Due to Covid-19?

Now that we are 20 months in to a whole new world where the entire employment climate has changed due to the coronavirus pandemic, it’s clear that things won’t ever return to the way they were.

Jobs that required lots of person-on-person interaction had to go on hiatus and many were temporarily laid off or lost their jobs entirely.

Office workers switched to a remote work-from-home schedule that limited contact and promoted social distancing. Since most office work is done on computers, the transition made sense.

However, many companies ran into hiccups along the way.

Mainly, certain materials and equipment were required to stay at the office so remote employees had to purchase their own home office equipment.

In fact, when surveyed, many remote workers were not allowed to bring any equipment home.

Those surveyed reported spending an average of $194 on equipment for work.

While it’s incredibly helpful for employers to reimburse these expenses, it’s not necessarily required. Employers each handle the situation differently and employees have to operate within the remote work policies they’re given.

Unfortunately, the Covid-19 pandemic didn’t change the fact that employees working from home weren’t able to claim unreimbursed expenses on their taxes, either.

How Are Companies Addressing Remote Worker Expenses?

Companies all over the world are handle office business expenses differently.

• Some companies provide their employees with what they need on the front end. In this case, the employee would be using all employer-owned equipment from computers to software to office supplies.
• Other employers are allowing employees to fill out itemized expense reports. Employers may have specific expense reimbursement requirements that purchases must meet.
• Companies can offer a monthly stipend or bonus to each employee based on an estimated cost of allowable expenses an employee will incur.

While all companies in the US are not necessarily required to reimburse employees for work-from-home expenses, good employers know how important it is to boost employee morale.

Taking care of employee expenses is just one way to ensure employees stay satisfied during the current crisis.

Reimbursement May Be Required by Law

It never hurts to ask an employer what their reimbursement policy is. Some employers might be willing to reimburse expenses regardless of whether they are required to do so.

In some states, however, employers are required by law to pay for their employees’ necessary job-related expenses when they work from home. These states include:

• California
• District of Columbia
• Illinois
• Iowa
• Massachusetts
• Minnesota (reimbursement required only at the end of a person’s employment)
• Montana
• New Hampshire
• New York (failure to reimburse a non-exempt employee can result in a misdemeanor)
• Pennsylvania

The Fair Labor Standards Act (FLSA) ensures that employees who work from home cannot be required to pay for their own legitimate work-related expenses if doing so would cause their hourly wages to dip lower than the legal minimum wage.

So, certain low-paid employees who work from home may be reimbursed for job-related expenses to ensure their hourly wages are not impacted.

What Remote Work Expenses Are Covered?

The states listed above require employers to reimburse their remote employees for any and all business-related expenses. If you live in one of the 10 states that do require full reimbursement, be sure to keep your itemized receipts!

Even if you do not work in one of the 10 states where full reimbursement is required, always check with your companies HR department to see what remote work expenses are reimbursable.

You may be entitled to reimbursement if you have paid for reimbursable expenses out of pocket.

California Expense Reimbursement

In California, there are even stricter expense reimbursement requirements for companies. Employers must reimburse employees for the above items, but there are additional expenses that employers must cover, as well.

• A separate business phone for employees
• Home utilities used while working at home
• Travel expenses incurred for business purposes
• Attorneys’ fees incurred if the employee should have to go to court for reimbursement of other expenses

There are a few ways employers can reimburse these expenses, whether they give employee stipends or repay them based on employee expense reports.

Work-from-Home Stipend as a Solution

Now that we’re nearly two years into the Covid-19 pandemic, most people have grown comfortable working from home. In fact, a LOT of us have realized how well it suits us.

Employers and employees are finding that the arrangement has advantages for everyone. A 2020 survey by SHRM showed that 68 percent of organizations surveyed reported they “probably or definitely will adopt broader or more flexible work from home policies for all workers.”

Since remote workers save companies money, work-from-home stipends are a clever solution for handling expenses. Employees with remote working arrangements can use these stipends for the following:

• Office costs: Equipment, office supplies, etc.
• Indirect expenses: Memberships to coworking spaces, learning and development expenses, coffee, food, etc.
• Personal expenses: Whatever an employee might want to spend the stipend on!

Companies that offer these stipends have happier, more productive employees. The money saved by each remote worker quickly pays for each employee’s stipend.

Average Home Office Stipend Amount

Companies that offer bonuses and stipends vary wildly in their amounts.

It’s important to note that each stipend may have its own tax implications. 

Employers should create a process to track whether stipends are taxable or nontaxable and have a plan in place to either cover the taxes or prepare employees to cover taxes on stipends.

Does It Cost More to Work from Home?

The perks of working from home are many, and those of us who work at home save money on gas. However, working at home can potentially increase other costs.

For example, people who rely on work computers might have to drop a big sum of money on a high-quality computer to use at home.

Additionally, many people who suddenly find themselves working from home don’t have a dedicated office space. So, creating an office space in already cramped living quarters can be challenging.

Without employer reimbursement, there are all kinds of expenses that can pile up both quickly and over time.

Added Costs of Working from Home

Some of the most common costs you’ll run into when working from home include:

• Utility costs: Running a computer all day eats up electricity. The AC and heater also run more.
• Software: Without an employer footing the bill, certain important computer programs can become pricy.
• Health and wellness costs: Without the space or money for ergonomic equipment, aches and pains can become costly. Additionally, the wrong environment can take a toll on a worker’s mental health.
• Maintenance costs: There’s usually no IT department at home ready to swoop in when something goes wrong.
• Salary cuts: Some employees even face salary cuts when they work from home.

Who Gets the Home Office Tax Deduction?

The home office tax deduction is great for those who are self-employed. This includes freelancers and independent contractors whose offices meet the following criteria:

• The office space is only for business. So, an office doesn’t actually have to be an entire room, but it can’t be the kitchen table or the bed where you sleep, either.
• The office space is regularly used for business. There’s a minimum requirement for how much your office area gets used each week.
• The office space must be your primary place of business. If you typically work somewhere else, you can’t claim the area where you work at home once per week.

Remote employed workers or W-2 employees, unfortunately, do not qualify for the qualified business expense tax deduction. The 2017 Tax Cuts and Jobs Act eliminated employees’ ability to take home office deductions.

However, this deduction SHOULD return in 2026 as long as the law doesn’t change further before that time.

Next Steps

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