Writing Off Expenses During COVID-19

When the president declared the COVID-19 pandemic a national emergency, businesses had to adapt quickly. Many shifted to work-from-home (WFH) models, and business owners added benefits and reimbursements for their employees to make the transition smoothly. Did you know that under Section 139 of the Internal Revenue Code, these expenses can be written off to reduce your taxable income? Let us walk you through it.

What is Section 139?

According to the IRS, “No.  Section 139 of the Internal Revenue Code … excludes from a taxpayer’s gross income certain payments to individuals to reimburse or pay for expenses related to a qualified disaster.” Since the pandemic was declared a national emergency by the president, it falls into the “qualified disaster” category.

How does this help you?

Let’s say that back in March, your business suddenly shifted to a total WFH model, and each of your employees needed new equipment, such as computer monitors or office phones, to set up their home offices. You decided to reimburse your employees’ purchases. These expenses are tax deductible under Section 139.

Possible expenses that could be covered under this section of the Internal Revenue Code include:

• Medical expenses not covered by insurance (deductibles and out-of-pocket costs)
• Critical care or funeral expenses for an individual or their family due to COVID-19
• Increased expenses due to staying at home (i.e., higher electricity and water bills)
• Any expenses incurred to set up or maintain home office space (internet, computers, printers, etc.)
• Costs of child-care for family who cannot attend school during the pandemic, including college students
• Nonperishable food purchases
• Expenses related to home-schooling and tutoring, such as computers and online education applications
• Temporary housing
• Expenses associated with mental and physical well-being (i.e., home fitness equipment, meditation apps, etc.)

Expenses NOT covered under Section 139:

• Expenses covered by insurance or other sources
• Nonessential items (think Netflix or Hulu subscriptions)
• Payments for lost income or compensation (wages, sick pay, family medical leave, etc.)

If you found yourself offering such payments to your employees over the last year, then these expenses may be written off on your tax returns. Need help sorting through what counts? Give us a call, and we’ll be happy to help! 770-392-1113

-Stanley & Kelly