As an S-Corp, since you are no longer self-employed, you are no longer eligible for the home office deduction. However, you can have the business reimburse you for a portion of your home-related expenses and other qualified expenses and when done properly these expenses will not count as wages and the reimbursement won't be taxable.
To do so, you would first need to create an Accountable Plan that defines a uniform policy for reimbursing these costs for employees of your company. Though the IRS doesn't require that policy to be documented in writing, they do require it to be an established policy.
What expenses may be reimbursed under an Accountable Plan?
The IRS has a great video and document on Accountable Plans that speaks to this in more detail. From that resource, an expense is eligible for reimbursement if it:
- Is incurred by the employee for services performed as an employee for the entity
- Is not an amount that would have otherwise been paid to the employee as wages
- Is documented adequately through receipts or other qualified documentation
For employees working from home, some home office expenses can be part of your company's Accountable Plan for example. Usually the percentage of these expenses that's reimbursable is determined by dividing the square footage of the employee's home office by the overall square footage of their home.
Travel expenses, meal expenses, and automotive expenses similarly may be reimbursable if incurred during business travel done for the benefit of the employer.
Creating an Accountable Plan
The IRS is not prescriptive about what an Accountable Plan should look like, but there are a few characteristics that are recommended be included in your plan to help ensure that only qualified expenses are reimbursed.
We recommend that your plan include:
- A specific list of expenses which your company reimburses
- The amount of money that will be reimbursed for each expense
- Guidelines for how to calculate the reimbursable expenses for mixed-use expenses that benefit both the employee and the business (e.g. home office expense reimbursement calculated based on the size of the home office)
- A documented process for submitting the required documentation for all reimbursable expenses
- The policy for when expenses must be submitted in order to receive reimbursement
You can use this Accountable Plan template as a starting point for defining your plan.
Gusto allows you to create one-time and recurring reimbursements for expenses. See Reimbursements and expenses for more on how to do this with Gusto.