Taxes: WFH expenses California CA 540 -> Form 2106

Member since 2020 · 21 posts · 5 votes

Hi,

Any thoughts on filing Form 2106 as part of California Form CA540 line 19 "Unreimbursed employee expenses" for WFH expenses? WFH means utilities, internet, phone which I use towards office work when working from home in my home office (separate room in my SFH). Reading the instructions for Form 2106 seems that one can only claim for things like overnight travel, but I have heard friends filing this form for WFH expenses (internet, phone, etc). Any thoughts?

Background: I have a full time job and only one SFH rental which I manage passively.

Thanks!

2 Reply

53 views

Most Popular Reply

Nate MeekerBusiness Member

Real Estate CPA | California · Member since 2020 · 543 posts · 251 votes

@Josh Smith - Unless you want to allocate every expense, you could take the simplified option. For 2023, the prescribed rate is $5 per square foot with a maximum of 300 square feet. This would go towards your rental if you had an exclusive and regular use area not used for your other job.

You and Sean are correct on the other employee WFH costs not being deductible.

The CPA Realtor 569 Reviews

Website View Page

2 Reply

See this reply in the discussion

6 Replies

Jump to latestLatest

Sort by

Sean O'KeefePro Member
CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
2y
Quote from @Josh Smith:

Hi,

Any thoughts on filing Form 2106 as part of California Form CA540 line 19 "Unreimbursed employee expenses" for WFH expenses? WFH means utilities, internet, phone which I use towards office work when working from home in my home office (separate room in my SFH). Reading the instructions for Form 2106 seems that one can only claim for things like overnight travel, but I have heard friends filing this form for WFH expenses (internet, phone, etc). Any thoughts?

Background: I have a full time job and only one SFH rental which I manage passively.

Thanks!
@Josh Smith Unfortunately, The "Tax Cut and Jobs Act (TCJA)" eliminated a lot of the original unreimbursed business expenses that you used to be able to claim - this is where all of the current confusion comes. This means employees can no longer offset their taxable income with employee business expenses that used to be eligible. There are now a limited few that are eligible.

Employees are not eligible to claim the home office deduction.

TCJA is not permanent, as the deduction will be reinstated beginning in 2026.
.
.
.

*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
[email protected]628-241-0888
1 Reply
Nate MeekerBusiness Member
Real Estate CPA | California · Member since 2020 · 543 posts · 251 votes
2y
@Josh Smith - Unless you want to allocate every expense, you could take the simplified option. For 2023, the prescribed rate is $5 per square foot with a maximum of 300 square feet. This would go towards your rental if you had an exclusive and regular use area not used for your other job.
You and Sean are correct on the other employee WFH costs not being deductible.
The CPA Realtor 569 Reviews
Website View Page
2 Reply
Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
2y
@Josh Smith
@Josh SmithMy colleagues were referring to Federal rules that no longer allow work-related expenses previously claimed on Form 2106.
CA, however, opted to not conform. It's a rare case when CA law is more beneficial than the federal law, usually it's the other way around. So yes, you can and should still use 2106 with CA 540.
Now, to the less exciting news:
- you still need to qualify. For example, if working from home is your choice, and you could work from office but chose not to - it is debatable whether you qualify
- your expenses may not be enough to make a difference on your CA tax liability
2 Reply
Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
2y
unreimbursed employee expenses are currently phased out at the federal level.

However, they may still be deductible at the state level.

However, for you to take advantage of the unreimbursed employee expense at the state level, you likely need to itemize your deductions.
Furthermore, you normally need to go above a certain threshold before they get counted as a deduction.

Also, do not factor in any costs that are reimbursed by your employer.
I.E. if you pay $1,000 for a continuing education course but reimbursed $1,000 by your employer. It would not be counted.
[email protected]917-280-8544
Basit Siddiqi CPA4.979 Reviews
View Page
2 Reply
Josh Smith
OP
Member since 2020 · 21 posts · 5 votes
2y
Quote from @Michael Plaks:

@Josh Smith
@Josh SmithMy colleagues were referring to Federal rules that no longer allow work-related expenses previously claimed on Form 2106.
CA, however, opted to not conform. It's a rare case when CA law is more beneficial than the federal law, usually it's the other way around. So yes, you can and should still use 2106 with CA 540.
Now, to the less exciting news:
- you still need to qualify. For example, if working from home is your choice, and you could work from office but chose not to - it is debatable whether you qualify
- your expenses may not be enough to make a difference on your CA tax liability

Thanks Michael. Your response makes a lot of sense. In Form 2106 can I include things like (a share of) utilities, internet, phone, etc towards the home office OR only stuff like overnight travel (of which I have none)? The instructions for 2106 seem to indicate only the latter, but I have heard folks including the former also.
Appreciate it!
0 Reply
Josh Smith
OP
Member since 2020 · 21 posts · 5 votes
2y
Quote from @Basit Siddiqi:

unreimbursed employee expenses are currently phased out at the federal level.

However, they may still be deductible at the state level.

However, for you to take advantage of the unreimbursed employee expense at the state level, you likely need to itemize your deductions.
Furthermore, you normally need to go above a certain threshold before they get counted as a deduction.

Also, do not factor in any costs that are reimbursed by your employer.
I.E. if you pay $1,000 for a continuing education course but reimbursed $1,000 by your employer. It would not be counted.

Thanks Basit. May I ask: In Form 2106 can I include things like (a share of) utilities, internet, phone, etc towards the home office OR only stuff like overnight travel (of which I have none)? The instructions for 2106 seem to indicate only the latter, but I have heard folks including the former also.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.