Who can actually claim the home office deduction?

The home office deduction is available mainly to self‑employed individuals who report business income on Schedule C, partners, and certain S‑corporation owners. Employees generally cannot claim home office expenses on their federal return because the Tax Cuts and Jobs Act suspended miscellaneous itemized deductions for unreimbursed employee expenses through tax year 2025. (See IRS Pub. 587 and the IRS home‑office page.)

In my practice advising remote professionals since 2010, I regularly see confusion about eligibility. If your employer reimburses you under an accountable plan, you should not claim the deduction — the reimbursement is typically the cleaner option.

Sources: IRS, Publication 587 — Business Use of Your Home; IRS Home Office Deduction page.

Two ways to claim the home office deduction

  1. Simplified method
  • Flat $5 per square foot of qualified home business space, limited to 300 square feet (maximum $1,500).
  • No depreciation allowed.
  • Minimal recordkeeping: document the square footage and business use.
  1. Regular (actual expense) method
  • Allocate actual expenses between business and personal use.
  • Deductible items can include a business portion of mortgage interest, rent, utilities, homeowners/renters insurance, repairs, and depreciation.
  • Requires Form 8829 (Expenses for Business Use of Your Home) if you file Schedule C, and Form 4562 to claim depreciation where applicable.

Note: You can choose the simplified or regular method for a given tax year, but there are rules for switching that can affect depreciation and later taxes on a home sale. (IRS Pub. 587)

Key eligibility tests (must be met)

  • Exclusive use: The area claimed must be used only for business. A corner of the dining room used for both family meals and client calls generally does not qualify.
  • Regular use: Use must be ordinary and consistent — e.g., working in the space daily or on a regular schedule.
  • Principal place of business or a place to meet clients: The home office must be the taxpayer’s principal place of business, or used to meet clients/customers in the normal course of business.

Special cases

  • Storage of inventory or certain product samples can qualify even without a conventional office setup.
  • If you perform administrative or management tasks at home but also conduct substantial business elsewhere, home use can still qualify if it’s your principal place of business.

Typical deductible expenses under the regular method

Direct expenses (100% deductible for the business area):

  • Repairs and maintenance that apply only to the home office (e.g., painting the office).

Indirect expenses (allocate by business percentage, typically office sq ft ÷ total home sq ft):

  • Rent or mortgage interest (business portion).
  • Utilities (electricity, heat, water, internet) — business portion of internet/cell costs.
  • Homeowners or renters insurance (allocated portion).
  • Depreciation on the business portion of your home (claimed over a recovery period; recapture rules apply on sale).

Caution: The business portion of mortgage interest and real estate taxes may also interact with Schedule A itemized deductions — IRS guidance explains allocation and reporting requirements; follow Publication 587 closely.

How to calculate the business percentage

Common methods:

  • Square footage method: Business square footage ÷ total finished home square footage (most common).
  • Number of rooms method: If rooms are similar size, count rooms used for business divided by total rooms.

Keep contemporaneous documentation: a floor plan, measurements, and photos. If you claim 10% of your home, be ready to justify that number during an audit.

Recordkeeping checklist (audit‑ready)

  • A worksheet showing how you calculated business square footage.
  • Photos of the dedicated workspace.
  • Copies of bills and receipts (mortgage statements, rent checks, utility bills, insurance, repairs).
  • Receipts for equipment and furniture (computers, desks, printers).
  • Copies of Forms 8829, Schedule C, and Form 4562 where used.
  • Employer reimbursement records (if any).

IRS audits often focus on exclusive use and accuracy of expense allocation; careful records reduce risk. See our guide on documenting home office expenses for more detail: Documenting Home Office Expenses Under Current Rules.

Depreciation and selling your home

If you use the regular method and claim depreciation for the business portion, depreciation is recaptured when you sell the home — part of your gain attributable to depreciation may be taxable, and a portion of the Section 121 exclusion (primary residence gain exclusion) can be reduced. Record the depreciation schedule and consult a tax pro before selling. (IRS Pub. 587)

Common mistakes I see with clients

  • Claiming a shared space (family room) as an exclusive office.
  • Failing to choose the most beneficial method: simplified is easier but sometimes leaves money on the table compared with the regular method.
  • Overlooking depreciation recapture when converting personal space to business use and later selling the home.
  • Not reclaiming employer reimbursements or not asking for an accountable plan — an employer reimbursement often beats claiming an employee deduction.

State tax differences and employee claims

Many states have different rules. Some allow deductions for unreimbursed employee expenses even if federal law disallows them. Check your state’s tax agency rules.

If you are an employee who works remotely, your options are generally:

  • Ask your employer for an accountable plan or reimbursement for equipment and supplies (best outcome).
  • Track expenses for possible state deductions where allowed.

For a deeper explanation of employee deductibility and remote work, see: Working From Home: Deductibility Rules for Remote Employees.

Practical examples

Example A — Self‑employed designer (regular method):
You use a 200 sq ft room in a 2,000 sq ft house for your studio (10%). Annual household expenses are $20,000 (mortgage interest, utilities, insurance). Business portion = $2,000 deductible on Schedule C; plus you may claim depreciation for the 10% business portion of your home’s basis.

Example B — Consultant (simplified method):
You use a 150 sq ft dedicated office. Simplified deduction = 150 × $5 = $750. No depreciation, easier bookkeeping.

Practical tips to maximize and protect deductions

  • Compare both methods annually — run a quick calculation to see which gives a larger deduction.
  • Use an accountable reimbursement plan through your employer for equipment and recurring costs when possible.
  • Keep detailed, contemporaneous records and photos; note dates when the space became business‑use only.
  • For shared expenses like internet, calculate a reasonable business percentage based on usage logs or a mix of time and household members’ use.

FAQs (short)

Q: Can employees claim home office deductions on their federal return?
A: Generally no — not for tax years 2018–2025 due to TCJA suspension. Certain categories (e.g., some performing artists, Armed Forces reservists) may still qualify. Check IRS Pub. 587 for exceptions.

Q: Can I switch between simplified and regular method?
A: Yes, but switching affects depreciation: once you claim depreciation under the regular method, you must follow special rules if you later use the simplified method for a subsequent year. Carefully review IRS guidance or consult a tax professional.

Where to get official guidance

Also see our related glossary entry on the general Home Office Deduction and tips for documenting expenses: Documenting Home Office Expenses Under Current Rules.

Professional disclaimer: This article is for educational purposes only and does not constitute legal, tax, or financial advice. Rules change; consult a qualified tax professional for guidance tailored to your situation.

In my practice, careful documentation and choosing the right method often add hundreds — sometimes thousands — of dollars to a remote worker’s tax benefit. If you’re unsure which method to use, run both calculations or consult a tax advisor before filing.