These Economists Want You to Pay a 5% Tax for Working From Home. Here’s a Better Idea

Photo to accompany a story about remote work taxes. Getty Images
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

If you’re one of about 40 million Americans working from home due to the coronavirus pandemic — that’s an estimate from Stanford University — you’re already familiar with the challenges it poses. 

And if economists at Deutsche Bank had their way, you would get taxed for it, too.       

”During the pandemic, the proportion of Americans who worked from home increased tenfold to 56 per cent,” the bank says in a study about how to rebuild the world’s economies after the coronavirus has passed. Remote workers who opt to stay home even after the pandemic subsides should pay, according to the study, a 5% percent “privilege tax.” That money should then go to low-income essential workers who cannot do their jobs remotely.

“The sudden shift to WFH means that, for the first time in history, a big chunk of people have disconnected themselves from the face-to-face world yet are still leading a full economic life,” writes Luke Templeman, one of the study’s authors. “That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits.”

Working from home has advantages, the study says, compared to an office: you save on clothes and commuting, for example. That is the privilege that should be taxed. 

The bank is proposing the tax should be paid by the employer if it does not provide the employee with a desk at the office. If it does, employees “should pay the tax out of their salary for each day they work from home.” Self-employed people and those who earn low incomes should be excluded, and the tax would not apply to “times when the government advises people to work from home.”

And while a 5% tax may seem like a lot, Deutsche Bank sees it differently. “We assume the average salary of a person who chooses to work from home in the U.S. is $55,000,” the study says, so the tax “works out to just over $10 per working day.” More or less the amount employees might spend on commuting, lunch and laundry each day, according to the bank’s estimates — leaving people “no worse off” than if they decided to go into the office.

With the $48 billion per year raised this way in the U.S., 29 million workers who make under $30,000 a year and cannot work from home would each receive a yearly $1,500 grant.

Like many around the world, we’re all working from home at NextAdvisor. The study definitely got our attention, and we turned to experts for their opinion.

“I understand the instinct behind this,” says Peter C. Earle, an economist at the libertarian-leaning, and tax-unfriendly, American Institute for Economic Research.

“Like many taxes, it’s an idea that looks humanitarian and logical on the surface.” But it would be tough to implement in practice, he said.

Tom Corrie, a tax attorney who is a principal and co-leader of the state and local tax practice at Friedman LLP in New York City, says the study has flaws, in particular when it assumes that people who work from home enjoy more job security.

“When you work from home, you’re not getting the mentoring and friendship,” he says, adding that job security often depends on developing relationships inside the firm as well as being good at one’s job.

“This will lead to innovative ways of avoiding the tax,” says Sanjukta Basu, a Ph.D. specializing in applied microeconomics. For example, the new levy may cause people to work from offices more, just to avoid being taxed.

Pro Tip

You don’t have to put a full 5% of your salary into savings, but you should definitely salt away some of it.

“People who choose to work from home for various reasons, including caring for a sick family member, may feel penalized,” she adds. Women would be hit disproportionately hard, according to Basu. “To call this a privilege tax borders on inappropriate,” says Earle.

And Stephan Levy, Senior Economist at management consulting firm Econ One Research, fears that employers would find ways around it.

“There are a lot of ways this still comes out of employees’ pockets,” Levy says. For example, if the tax is paid by employers, they might be hesitant to give raises to employees. 

Bottom line, nobody we spoke to was on board with the tax. And it’s safe to say that the Deutsche Bank study is not going to turn into law any time soon, anyway. 

“You’re essentially penalizing people for working from home, and all of these things are problematic in trying to impose a 5% tax,” is how Corrie summed it up, adding that the tax might even be challenged in court.

Here’s a Better Idea

Let’s assume that one of the study’s premises was right, and that working at home does save you money. 

Is there something else you should be doing with that 5% of your salary Deutsche Bank claims you’re not spending while working at home? It’s always a good idea to take care of your financial health and security — no matter where you find yourself working.

First and foremost, you could save for an emergency fund. “Unplanned expenses can happen at any time, and nothing helps you sleep better at night than knowing you have some money put away just in case,” Greg McBride, chief financial analyst at, told us in June. (Bankrate shares an owner with NextAdvisor.) 

Only 70% of Americans have a savings account, and a third have less than $1,000 in the bank, says Earle. For someone making $55,000 per year like the average worker cited in the study, that “5% in taxes is a meaningful amount,” he adds. 

You don’t have to put that entire 5% of your pay in the bank instead, but with all of the financial uncertainty this year, emergency funds are a crucial financial tool. 

Once you’ve got that squared away, it’s also a good idea to look at your retirement account. We understand it may be one of the last things on your mind during a pandemic, but it’s important to continue investing in yourself and your future.

If you’re a salaried worker, you might have access to a 401(k) or 403(b) account through your employer, and can set one up by contacting your human resources representative. Another option is to open a Roth IRA account, which is managed separately from your employer. There’s a contribution limit of $6,000 per year, but retirement savings can grow fast thanks to compound interest

Bottom Line

There’s no chance that the federal or local governments in the U.S. would introduce a wildly unpopular tax on working at home. But there is a higher chance that federal income taxes might be raised, at least for some income brackets, as deficits rise. 

That’s what Jill Schlesinger, a business analyst for CBS News and host of the “Jill on Money” podcast, told NextAdvisor recently, adding that people should take advantage of today’s relatively low taxes to save more for retirement. Schlesinger likes Roth IRAs, but whatever your chosen form of saving, now is the time to stick to it — if you are able to. 

And that applies whether you are going into an actual workplace, or one of the 40 million Americans who are working at home during the pandemic.