Work From Home Expenses: Who Pays What? (2024 Guide)

Table Of Contents

Is My Employer Required to Cover My Expenses if I Work From Home?
Can an Employer Refuse to Reimburse Expenses?
Can I Get a Tax Break for Remote Working Expenses?
Employee Expense Reimbursement by State
FAQs
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Is My Employer Required to Cover My Expenses if I Work From Home?

According to the SCLG, the federal Fair Labor Standards Act (FLSA) generally does not mandate reimbursement for expenses incurred while working from home [1]. However, certain states like California and Illinois have laws requiring such reimbursements.

The only time that the FLSA impacts work-from-home reimbursements is if the cost would lower the employee’s earnings beneath the applicable minimum wage. Because this only protects workers whose income is fairly close to the minimum wage, the FLSA is rarely implicated in reimbursements for work-related expenses – SCLG.

Several states have specific statutes outlining when employers must reimburse employees for business expenses related to remote work or telecommuting. These states include:

California
District of Columbia
Illinois
Iowa
Massachusetts
Minnesota
Montana
New Hampshire
New York
Pennsylvania

The reimbursement requirements vary among these states. For instance, in Minnesota, employees must be compensated for certain business expenses at the end of their employment. In contrast, New York considers the failure to reimburse a non-exempt employee for reimbursable expenses a misdemeanor.

While employers in some states are not legally required to cover business expenses, many choose to do so voluntarily. When they do, the terms of reimbursement are typically outlined in the employment contract or employee handbook. Violating these terms can constitute a breach of contract.

Also Read: Business Use of Personal Phone

Can an Employer Refuse to Reimburse Expenses?

Yes. If there is no legal requirement for reimbursement and the employer’s policies do not mandate it, the employer can refuse reimbursement requests. Even in locations where reimbursement is required by law, there are circumstances under which reimbursement can be refused:

Unnecessary expenses: Employers are not obligated to reimburse expenses that are not necessary for job performance. This includes items like decorations or unnecessarily expensive versions of necessary items.

Unsubstantiated expenses: Generally, employers do not have to reimburse expenses without adequate documentation, unless the policy states otherwise.

Expenses that violate company policy: A business does not have to reimburse expenses that violate or do not meet its policies. This point further underscores the importance of a clear Work from Home Policy that specifies reimbursable expenses.

Can I Get a Tax Break for Remote Working Expenses?

At present, employees who work remotely and receive a W-2 cannot claim deductions for home office expenses. This deduction was suspended by the 2017 Tax Cuts and Jobs Act until 2025. However, independent contractors and freelancers who receive a 1099 form for their work can deduct home office expenses if the space is used exclusively for business purposes.

Employee Expense Reimbursement by State

State	Summary	Reference
California	Employers must reimburse California employees for “all necessary expenditures or losses”, including those they incurred at the employer’s direction. Necessary expenses include internet access and phone bills for remote workers. According to state law, necessary expenditures include all reasonable costs. California courts have interpreted the law to include a reasonable percentage of remote employees’ monthly internet costs or cell phone bills.	California Labor Code Section 2802 ⁴
District of Columbia	Employers must reimburse employees for the cost of purchasing and maintaining all necessary tools related to their scope of employment.	D.C. Municipal Register Title 7 Section 910 ⁵ Notice of Final Rulemaking, 41 DCR 187
Illinois	Employers must reimburse employees for all necessary expenses or losses. This includes reimbursement for internet access and phone bills when employees use them for remote work purposes. Employers can specify what they’ll pay for each type of expense. Employees must also submit requests for reimbursement within 30 days of incurring the eligible expense.	Illinois Wage Payment and Collection Act, Section 9.5: Reimbursement of employee expenses ⁶
Iowa	Employees only need to reimburse expenses they authorize. They must pay out reimbursements within 30 days. If an employer doesn’t pay the reimbursement request, they must provide a written notice explaining why within 30 calendar days.	Iowa Code 2022, Section 91A.3 ⁷
Massachusetts	Enforces the same protections as federal law: expenses may not reduce an employee’s wage below the current state minimum wage. This is $14/hour in 2024. While not required, the Massachusetts Attorney General’s Office recommends reimbursing employees for all expenses that are unavoidable and necessary.	Massachusetts General Laws Part I, Title XXI, Chapter 149, Section 148 ⁸
Minnesota	Employers must reimburse employees for any expenses listed in subdivision 4 of the law, which includes uniforms, purchased or rented equipment, travel expenses for employment (except for commuting), or consumable supplies, upon their termination of employment. After reimbursing employees, employers can require them to return any items.	Minnesota Statute 177.24 ⁹
Montana	Employers must reimburse all necessary expenses, including those they incurred at the employer’s direction or during the discharge of their normal job duties. Because of the broad language of the law, this may include remote work costs such as internet access costs and cell phone bills.	Montana Code 39-2-701 ¹⁰
New Hampshire	Employers must reimburse employees for expenses connected with their employment and made at the employer’s request within 30 days of when the employee presents proof of payment to the employer.	New Hampshire Revised Statutes Title 23 Section 275:57 ¹¹
New York	Employers must provide reimbursements to employees for expenses if there’s an agreement, such as an employment contract, that outlines expense reimbursement. The state considers failing to abide by reimbursement agreements as a misdemeanor.	New York Labor Law Section 198-C ¹²
North Dakota	Employers must reimburse employees for business expenses related to necessary duties or at the employer’s direction. Because of the broad language of the law, this may include remote work costs.	North Dakota Century Code Section 34-02-01 ¹³
Pennsylvania	According to the Pennsylvania Personal Income Tax law, employees can claim any unreimbursed expenses as deductions on their tax returns.	43 Pa.Stat. § 260.3
South Dakota	Employers must reimburse all necessary expenses, including those incurred by the employer’s direction.	South Dakota Statute Codified Law 60-2-1 ¹⁴
Washington	Employee reimbursements are at the employer’s discretion. Unreimbursed employee expenses may be tax-deductible. Seattle: Employers must pay employees all compensation owed to them, including any business expenses. This can include any remote work-related expenses.	Washington State Department of Labor & Industries ¹⁵ Seattle Wage Theft Law ¹⁶

Source: PeopleKeep [2].

FAQs

What work-from-home expenses are typically reimbursable by employers?

Reimbursable work-from-home expenses can include internet and phone bills, office supplies, ergonomic furniture, computer equipment, and software. Policies vary by employer, so it’s essential to review your company’s specific guidelines on reimbursable expenses.

How can employees request reimbursement for work-from-home expenses?

Employees can request reimbursement by submitting expense reports with receipts to their employer’s HR or finance department. It’s important to follow company policies and provide detailed documentation to ensure prompt and accurate reimbursement.

What are some common non-reimbursable work-from-home expenses?

Common non-reimbursable expenses may include personal utility bills (beyond what is necessary for work), home maintenance costs, and personal furniture or décor. Employers typically only reimburse expenses directly related to performing work duties.

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References:

1. https://www.peoplekeep.com/blog/remote-employee-reimbursement-rules-by-state
2. https://www.shouselaw.com/ca/blog/what-expenses-should-my-employer-pay-if-i-work-from-home/