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Do I have to pay income tax on contribution to home office rent from company?

Personal Finance & Money Asked by Larn on February 4, 2021

My girlfriend and I work for the same company based in the UK, and are being moved to New York City, where we will work from home (aside from some time spent visiting clients, say 20% of the time or less). We will need to rent a 2-bed apartment and will use the spare room solely as the ‘office’. Our company has agreed to to contribute to our rent at a set amount per month, since we are needing to rent a larger place at more expense to ourselves. They are planning to give us this money by adding it to our normal monthly paycheck, meaning that we will end up paying top-rate income tax on it. This reduces the usefulness of the company contribution dramatically, and seems enormously unnecessary and unfair to me – surely if they were, say, paying the same amount for a separate office space somewhere then no tax would be involved in this (other than VAT maybe)? Similarly, one doesn’t pay tax on business expenses that are refunded by the employer – for example if you buy a flight for work and are refunded the money for it by your company you don’t have to pay income tax on this refund. Is there an easy way around this – can we just have them just pay our rental company directly for example – would that be taxed in any way?

One Answer

This is essentially a reimbursement of your expense. Since you can deduct the expense, the fact that the reimbursement is taxable doesn't affect you much. You deduct your home office expenses on your annual tax return using form 8829. See the IRS site for more details.

If you're asking about the UK tax, there may be some other considerations, but from the US tax perspective it is (nearly) a wash.

Answered by littleadv on February 4, 2021

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