EMPLOYEE’S HOME COMPUTER USED FOR BUSINESS 

Working at your home on your home computer has become a normal occurrence for many employees.  It seems only right that if you use your personal computer for your employer, you can take the cost of the computer off as an employee business expense.  Unfortunately, those kind-hearted IRS folks see it differently, and disqualify this deduction to nearly all employees.

Yes you can write off your home computer, but ONLY if you satisfy BOTH of these requirements:

1.      The computer MUST be required as a “condition of employment.”  This means the home computer must be essential for you to properly perform your job.  A specific detailed agreement between the employee and employer describing the requirements for your employment and that a computer is required for you to properly perform your work is mandatory.  

2.      The second requirement trips up most employees.  The computer MUST be for the “convenience of the employer.”  Most employees buy a computer for their convenience, not for their employer’s.  Using a home computer just so you do not have to stay late at the office, to prepare reports for your employer, or other job-related projects, does not qualify.  Despite legitimate business use, employees generally may not write off the cost of the computer as a tax deduction.  The IRS has taken the position that if you have access to your home computer at night, then the home computer is for your convenience and not your employer’s.

The IRS interpretation of the rules makes it difficult to deduct depreciation on a computer even if the computer is used only for company work.  If the purchase of the computer is optional and not absolutely required by their employer as a condition of their employment, it is not deductible.  The IRS has even denied a deduction even when an employer offers to help pay for a computer, provides an interest-free loan, offers instruction courses for using it, and restricts its sale.  The deduction has been disallowed when the employee used his own computer since the company computers were not available to employees who use them in their work.  The IRS has ruled against a college professor and an insurance agent since the computer was not absolutely required by their employers.

A deduction was allowed in the case of a sales managers after her supervisor testified that the taxpayer used the computer to prepare reports and keep up-to-date, AND had a heavy caseload, AND could access the office computer at home through a modem, AND was not allowed access to the office computer after business hours.

In addition, if an employee satisfies the strict requirements, the deduction for the depreciation of the computer is an “Other Expense” deduction on Schedule A, Itemized Deductions, and that deduction category is limited to expenses exceeding 2% of the taxpayer’s adjusted gross income.  Since this is an itemized deduction, some taxpayers do not have sufficient other deductions when combined with the computer deduction to exceed the standard deduction, even if the computer does qualify.