Q: My son is an employee but his office has been closed for almost two years. He is required by his employer to work from home. He has a dedicated space used solely for that purpose. I used to prepare taxes at a VITA site and IRS taught us that an employee could deduct office-in-home costs. The requirement was that the use was for the convenience of the employer. I informed my son that he could claim an office in home deduction under this rule. He has not done so because he found something on the IRS site that specifically says, “Employees are not eligible to claim the home office deduction.” I’ve attached a link. It is titled, “How small business owners can deduct their home office from their taxes.” I know there has been issues with IRS giving bad advice. But this is right on their website. My son is not a small business owner but the link specifically starts by saying employees cannot deduct offices. The site seems to apply whether you are a small business owner or not. My son treats it as settled. What if it is for the employer’s convenience? Actually required by the employer.
A: This is actually sort of a trick question. The rule as you remember it continues in the law. You could search for Section 280A(c)(1) of the Internal Revenue Code.
The last sentence of that citation does say that an employee’s business use must be for the convenience of the employer. The pandemic creates more of these convenience situations.
The statement on the IRS site is equally true. However, the IRS statement is based on how the statutory convenience rule interacts with another section of the law.
Effective for 2018 through 2025 Section 67(g) suspends any deduction for unreimbursed employee business expenses. Those expenses are part of itemized deductions that had to exceed 2% of adjusted gross income.
In a broad sense, your recollection of the rule from your former VITA days is correct. More narrowly, IRS (and your son) is right through the end of 2025.
When my mother was adamant that she was right she would say, “Mark my words!” Perhaps you should try that and dig up those marked words in January 2026.
Q: I turn age 72 in late November 2022. I also have a large IRA that I do not need to use for retirement needs. Because my wife and I have charitable desires, I am a perfect candidate for the qualified charitable distribution (QCD) strategy. I am familiar with the strategy as allowing required minimum distributions (RMDs) to be transferred to a qualified charity to allow you to report no income from the RMD. This effectively allows a 100% tax benefit from the donation. My church has a building campaign kicking off in June. I would like to transfer $50,000 from my IRA but have it qualify as a QCD. The problem is I am not (yet) age 72 in June. Can it still be a QCD if my RMDs start in the same year as the gift?
A: Section 408(d)(8) of the tax law has three requirements for a QCD. It cannot exceed $100,000. It must be made directly by the plan trustee to the qualified organization. It must be made on or after you attain age 70½.
The age requirement clearly links to the RMD age when the QCD provision was enacted. Since then, the recent SECURE Act changed the age for RDs to 72. However, the QCD provisions never changed.
A QCD does not have to be part of a RMD. It reduces the amount of the RMD. Even before SECURE a QCD could exceed the RMD provided it did not exceed $100,000.
Therefore, the age requirement remains at 70½. Your general point is a good one — the answer is a QCD must be on or after reaching 70½, not just in the year you reach 70½.
However, the age changes to beginning RMDs did not cause a similar change to the age requirements for a QCD. You will be able to make a QCD right now. You could have made one in 2021, but not in 2020.
Jim Hamill is the director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.
