Working Remotely and Tax Reliefs

It’s not an exaggerating to state that how the world works has been forever changed by the Covid-19 pandemic.
Only a few short months ago, working from home would have been unthinkable for most people, however, working remotely or e-working has become a reality for much of the country.

Aside from the obvious challenges of working around children or fighting with unreliable internet connections, there are tax ramifications associated with working from home.
Today we hope to make it clear what tax rebates an employee working from home is entitled to.

What expenses are you entitled to Claim tax relief on?

If you are working from home you are entitled to claim tax relief on expenses like internet usage, light, heat and telephone usage.
The amount you can claim depends on if your employer pays you anything towards these expenses. For example, if your employer pays you an allowance towards the above expenses you can get up to €3.20 a day without paying any tax, PRSI or USC on this amount.
If however, your employer pays more than €3:20 a day towards these expenses you pay tax, USC and PRSI as normal. This tax is claimed on the amount over €3:20.

However, if your employer doesn’t pay you anything towards your internet usage, light, heat and telephone usage expenses, you are entitled to claim tax relief at the end of the year. This means you will get some of the money you paid in taxes – towards these expenses – back.

The tax refund amount is calculated by taking into account:
– The number of days you worked from home
– The actual cost of the expenses
– The revenue’s agreed rate for calculating the cost of running an office from home

Revenue’s rates for running a home office

Revenue’s rate for the cost associated with running a home office is 10% of the cost of electricity and heating. This means that individuals working from home can claim 10% of the total amount of allowable utility bills against their taxes.
However, it must be remembered that an individual is only entitled to claim this for the days they worked from home. This isn’t applicable in instances where an individual worked in the office for the full day before bringing work home with them and continuing to work.
Due to COVID 19, an individual can claim back 30% of their broadband costs for the year 2020.

What this means in monetary terms

An example of how these tax reliefs translate into money in your pocket is:

Say you work from home for 6 months due to the Covid-19 pandemic. In this 6 months period, the accumulative total for your heating and electricity bills comes to €1000 euro. You also pay €300 total for broadband.
Therefore you can claim back 10% of €1000 which equals €100
And you can claim back 30% of €300 which equals €90.
The total amount comes to €190.
The amount you get back depends on your individual rate of tax. So if you pay the higher 40% of tax, you’ll receive €76 e.g. 40% of €190.
If you’re on the lower 20% tax rate you’ll receive €38 euro back e.g. 20% of €190. If you have any more questions or if you need assistance in calculating what you are entitled to, please get in contact with Bond and Co today.