Author Topic: W2 switch to 1099 = home office deduction?  (Read 316 times)

jgm

  • 5 O'Clock Shadow
  • *
  • Posts: 3
W2 switch to 1099 = home office deduction?
« on: October 22, 2018, 11:38:29 AM »
I've been a W2 employee for my employer all year, but I will likely be switching to a freelancer (1099 I assume?) for November and December - same employer, same job. I've worked from home all year, but per IRS rules, I won't qualify for home office deductions as a W2.

- If I switch to 1099, will I qualify for the home office deduction for Nov/Dec? I've been looking to remodel/buy new furniture for my home office that I'll be using 100% for work, so I'm wondering if I'll be able to deduct it all against my 1099 income?
- Anything to keep in mind regarding the switch being partial year?
- Any other advantages to doing this? Maybe ability to deduct a portion of my overall home bills?
- Any disadvantage or things to watch out for?

Thanks for any insight!

therethere

  • Pencil Stache
  • ****
  • Posts: 576
Re: W2 switch to 1099 = home office deduction?
« Reply #1 on: October 22, 2018, 12:02:01 PM »
Did you negotiate a raise when you switched to 1099? You'll be paying more taxes.

Curious as to what prompted the switch. If you're doing the same job as before with the same autonomy as before, is the company just trying to skimp out on benefits?


bacchi

  • Magnum Stache
  • ******
  • Posts: 3129
Re: W2 switch to 1099 = home office deduction?
« Reply #2 on: October 22, 2018, 12:16:39 PM »
There's a home office per square foot deduction now, which makes it a lot easier (and safer) to use than what it used to be. Most importantly, there's no depreciation or recapture.

So, yes, you can use that deduction and any bought furniture if it's 100% exclusively for work. Don't be stupid and call attention to yourself by buying a (real) Eames chair.

Of course, it's pretty suspicious to convert from a W2 to a 1099 at the same company with the same job. The IRS will look askance at that conversion.

jgm

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: W2 switch to 1099 = home office deduction?
« Reply #3 on: October 22, 2018, 03:25:28 PM »
Did you negotiate a raise when you switched to 1099? You'll be paying more taxes.

Curious as to what prompted the switch. If you're doing the same job as before with the same autonomy as before, is the company just trying to skimp out on benefits?

No raise or anything, I simply just want the option to work fewer hours. Then it dawned on me it could be advantageous since I need to fix/remodel my office and home at some point.

There's a home office per square foot deduction now, which makes it a lot easier (and safer) to use than what it used to be. Most importantly, there's no depreciation or recapture.

So, yes, you can use that deduction and any bought furniture if it's 100% exclusively for work. Don't be stupid and call attention to yourself by buying a (real) Eames chair.

Of course, it's pretty suspicious to convert from a W2 to a 1099 at the same company with the same job. The IRS will look askance at that conversion.


Hmm, so where's the line of what I can deduct or why this would be considered suspicious? I simply want the option to work fewer hours and I realized this might be a golden opportunity to fix my home/office. It really needs a lot of work done: paint the walls, replace the carpet, purchase a sofa, desk, chair, decor. My home (outside the office) also needs new windows ($2k+) and such. Do they actually scrutinize the individual items I deduct..? Just not sure where the line is here. I'm certainly not buying any diamond chairs, but I'm sure the total for all of this work will be near $5k (freelance gross will probably be $20k).
Would it be more "legit" to keep my job (maybe reduce my hours in a different way) then freelance for a different company to better qualify for this? Seems wasteful to do all this work to my home/office without taking advantage of potential deductions.

bacchi

  • Magnum Stache
  • ******
  • Posts: 3129
Re: W2 switch to 1099 = home office deduction?
« Reply #4 on: October 22, 2018, 10:53:03 PM »
Hmm, so where's the line of what I can deduct or why this would be considered suspicious? I simply want the option to work fewer hours and I realized this might be a golden opportunity to fix my home/office. It really needs a lot of work done: paint the walls, replace the carpet, purchase a sofa, desk, chair, decor. My home (outside the office) also needs new windows ($2k+) and such. Do they actually scrutinize the individual items I deduct..? Just not sure where the line is here. I'm certainly not buying any diamond chairs, but I'm sure the total for all of this work will be near $5k (freelance gross will probably be $20k).
Would it be more "legit" to keep my job (maybe reduce my hours in a different way) then freelance for a different company to better qualify for this? Seems wasteful to do all this work to my home/office without taking advantage of potential deductions.

You can deduct furniture that's necessary for your office/work. A bed won't qualify, nor would a dresser.

Repairs and capital improvements (like the carpet and paint) are ignored using the "simple" home office deduction; if you use the more complicated home office deduction, you can deduct those improvements. The more complicated method also means deprecation recapture when you sell the house, though. It's messy so make sure it's worth it.

https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction


The employee to contractor conversion is the problem. The IRS really doesn't like W2 employees becoming 1099 employees for the same company and same job. It indicates that the company is trying to get around paying their share of FICA and unemployment, etc. If you're converting, you should get a raise per hour -- you'll be saving them FICA, comp, unemployment, vacation, etc.