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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?

  • Check this gov.uk/tax-relief-for-employees/working-at-home – DumbCoder Jul 9 '15 at 16:39
  • Why not simply negotiate a payment from the company that works out, after tax, to be the difference between a one-bed and two-bed apartment? There are "deduct expenses for your home office" approaches that might also work. – Kate Gregory Jul 9 '15 at 16:49
  • @Kate Gregory: Yes, at least in the US case, I think you would just deduct the cost of the home office on form 8829 of Schedule C, if you're self-employed, or IIRC the "Business Expenses of an Employee" line on Schedule A if you're an employee. Either way, it would end up having no net effect on taxes owed. – jamesqf Jul 9 '15 at 17:47
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    Have you established yet whether the move is permanent enough that you will be subject to US taxation, or still under UK rules? The tax codes are very different which means the correct answer is likely to be too. – Nigel Harper Jul 9 '15 at 18:27
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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.

  • Except they're renting--it's unlikely they can even itemize and then it's subject to a 2% floor beyond that. Paid/deductible is nowhere near a wash! Not to mention that deductions don't even apply to FICA. – Loren Pechtel Jul 9 '15 at 23:16
  • @LorenPechtel they're working for a UK employer, so they're likely to be schedule C contractors. How does renting in any way matter? FICA is not a concern since, again - UK employer. Only net Schedule C income is subject to FICA. – littleadv Jul 9 '15 at 23:21
  • Good point about the schedule C. – Loren Pechtel Jul 9 '15 at 23:23
  • You're assuming their home office qualifies for the deduction under 8829. It is extremely hard for someone who is not self-employed to qualify for that deduction. (The OP might qualify, but it's hard to tell from just what we've been told.) – David Schwartz Jan 22 '17 at 5:20

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