Quick summary (one-line)

Most W-2 employees cannot claim unreimbursed home‑office expenses on federal returns for tax years 2018–2025 because of the TCJA suspension of miscellaneous itemized deductions, while self‑employed workers can still claim a home office deduction if they meet IRS rules (see IRS Publication 587).

Why this changed — the legal background

The Tax Cuts and Jobs Act of 2017 (TCJA) suspended miscellaneous itemized deductions subject to the 2% floor — which historically included unreimbursed employee business expenses — for tax years beginning in 2018 through 2025. That suspension means most employees who receive a Form W‑2 cannot deduct home office costs as itemized deductions on Schedule A for those years. The change did not eliminate the home office deduction for self‑employed taxpayers who report business income on Schedule C (Form 1040); those taxpayers still use either the simplified or the actual expense method (IRS, Home Office Deduction) (https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction).

This distinction is central: the TCJA changed the treatment of employee expenses, not the home office rules that apply to sole proprietors and other self‑employed filers. See IRS Publication 587 for the rules that still govern business use of the home (https://www.irs.gov/publications/p587).

Who is affected

  • W‑2 employees: Largely affected. For 2018–2025, most cannot claim an unreimbursed home office deduction on their federal return.
  • Self‑employed individuals (sole proprietors, single‑member LLCs taxed as sole proprietors): Not affected — they can still claim the home office deduction if they meet the “regular and exclusive use” and “principal place of business” tests (IRS Publication 587).
  • Independent contractors and gig workers: Typically treated like self‑employed taxpayers; they generally remain eligible for the deduction.
  • Employees with reimbursements: If an employer reimburses expenses under an accountable plan, those reimbursements are not taxable and the employee cannot also deduct the same expenses.

Note: A few narrow exceptions historically existed for certain types of employee expenses, but the broad suspension applies to most W‑2 employees. Taxpayers with unusual circumstances should check IRS guidance or consult a tax professional.

Core qualification tests (what the IRS requires)

To claim a home office deduction as a self‑employed taxpayer, two basic conditions apply:

  1. Regular and exclusive use: You must use a portion of your home regularly and exclusively for your trade or business. Occasional or nonexclusive use (a dining table used for bills and family meals) doesn’t qualify.
  2. Principal place of business: The home office must be your principal place of business, or used to meet clients or patients in the normal course of business. If you perform substantial administrative work at home, it may satisfy the principal‑place test even if you also work at a rented office.

The IRS allows two calculation methods for eligible taxpayers:

  • Simplified method: $5 per square foot of the qualified area, up to a 300 square‑foot maximum (maximum deduction $1,500). This method reduces recordkeeping (IRS, Home Office Deduction).
  • Actual expense method: Deduct a percentage of direct and indirect expenses (mortgage interest, insurance, utilities, repairs, depreciation, rent) based on the portion of your home used for business. Form 8829 (Expenses for Business Use of Your Home) helps compute this when filing Schedule C.

Practical implications and examples

  • Self‑employed graphic designer: Continues to claim a home office deduction if a dedicated room is used exclusively for business. Using the actual method may allow depreciation and a share of mortgage interest and utilities; the simplified method usually suits smaller spaces or when recordkeeping is limited.
  • Employee who shifted to remote work during the pandemic: Even if working a full week from home, most cannot claim a home office deduction on their federal return for 2018–2025. The cost of a home printer, business internet portion, or office furniture is generally nondeductible for these employees unless reimbursed by the employer.

Example (simplified): A self‑employed consultant with a 200‑sq‑ft home office may claim $1,000 using the simplified method (200 x $5), or calculate a larger deduction if actual expenses and depreciation justify it using Form 8829.

Recordkeeping and documentation (what to keep)

Good records make a deduction defensible. Recommended documentation includes:

  • Measurements and a floor plan showing the business area vs total living area.
  • Photos of the office space showing exclusive use.
  • Receipts and invoices for furniture, equipment, repairs and utility bills.
  • A contemporaneous log of business‑use percentages (for mixed‑use items such as phone, internet and utilities).
  • Dates the business began using the space and evidence of income generated from that activity.

If audited, the IRS will look for consistent proof of exclusive use and that the space functioned as your principal business location (see What the IRS Looks for in Small-Scale Home Office Audits for practical audit insights) (https://finhelp.io/glossary/what-the-irs-looks-for-in-small-scale-home-office-audits/).

Employer reimbursement and accountable plans

Employers can avoid leaving employees out of pocket by offering reimbursements. Under an accountable plan:

  • The employer reimburses only business expenses supported by receipts and documentation.
  • The amounts reimbursed are excluded from the employee’s income and do not need to be reported as wages.

Receiving reimbursement under an accountable plan disqualifies that expense from being deducted by the employee — but it is generally the preferred outcome because it preserves the employee’s take‑home pay.

State tax differences

Some states do not follow federal changes and may still allow deductions for employee business expenses, including home office costs. Taxpayers must check state rules or consult a tax pro because state treatment can differ materially from federal rules.

Common mistakes and audit triggers

  • Claiming exclusive use for a space that serves both personal and business functions (e.g., household living room).
  • Applying the home office deduction for a W‑2 job in 2018–2025 without confirming eligibility or employer reimbursements.
  • Failing to substantiate square footage or the business purpose of the space.

See additional guidance on tracking expenses to prepare for tax time (https://finhelp.io/glossary/how-to-track-work-from-home-expenses-for-tax-time/).

Practical strategies (what taxpayers can do now)

  1. Ask for an accountable plan: Employees should request an accountable reimbursement plan from their employer. It allows reimbursement of home office expenses without taxable income consequences.
  2. Track costs anyway: Even if not deductible now, keep detailed records (receipts, dates, square footage) in case laws change or a portion of the expense becomes deductible at the state level.
  3. Evaluate entity structure: Some workers who switched to independent contracting or formed single‑member LLCs may qualify as self‑employed and could claim legitimate home office deductions. This decision has tax and legal consequences — consult a tax advisor before changing status.
  4. Use the simplified method if appropriate: For many self‑employed filers with smaller home offices, the simplified $5/sq‑ft method reduces recordkeeping while providing a straightforward deduction.

What to watch for going forward

The TCJA suspension for miscellaneous itemized deductions is scheduled to remain in effect through 2025. Legislative changes that extend, alter, or repeal that suspension would change the landscape for employee home office deductions. Until Congress acts, the current separation between employee and self‑employed deduction rights stands.

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Professional disclaimer

This article is educational and does not replace personalized tax advice. Tax rules change and individual circumstances vary. Consult a qualified CPA, enrolled agent, or tax attorney for guidance tailored to your situation.

(Author: Senior financial editor and licensed tax professional — content reviewed for accuracy against IRS guidance as of 2025.)