Quick overview

Documenting work-from-home deductions for 2025 means three practical tasks: (1) confirm eligibility for the deduction, (2) pick the simplified or actual-expense method, and (3) maintain audit-ready records (floor plans, receipts, logs). This article gives a step-by-step documentation plan, real examples from my practice, and links to IRS guidance so you can confidently prepare your return.

Sources: IRS Publication 587 (Business Use of Your Home) and Form 8829 are the primary IRS references for the regular method; the simplified method is described in IRS guidance for home office deductions.

Who can claim a work-from-home deduction in 2025

  • Self-employed taxpayers (sole proprietors, single-member LLCs taxed as individuals, independent contractors) may claim the home office deduction on Schedule C (Form 1040) using either the simplified or regular (actual expenses) method. (IRS Pub. 587, Form 8829)
  • Employees generally cannot claim an unreimbursed home office deduction on their federal tax return because the Tax Cuts and Jobs Act suspended miscellaneous itemized deductions subject to the 2% floor through 2025. Exceptions are very limited (e.g., certain performing artists, qualified reservists, or employees with impairment-related work expenses). For most W-2 workers, the practical path is an employer reimbursement under an accountable plan. (IRS guidance)

In my work with small business owners, clarifying status (employee vs. self-employed) is the earliest and most important step. Misclassification leads to incorrect filings that often trigger audits.

Step-by-step documentation checklist (practical)

  1. Verify eligibility and tax status
  • Confirm whether you file Schedule C (self-employed) or are a W-2 employee. Only Schedule C filers routinely claim the deduction on the federal return.
  1. Choose a deduction method for 2025
  • Simplified method: $5.00 per square foot up to 300 sq ft (maximum $1,500). No depreciation; fewer records required but may yield a smaller deduction for larger or higher-cost homes. Use for small workspaces or when you prefer easy documentation.
  • Regular (actual) method: Track actual expenses (mortgage interest, rent, utilities, insurance, repairs, depreciation). Compute the business-use percentage (square footage of office ÷ total home square footage). Requires Form 8829 for Schedule C filers. (IRS, Form 8829; Pub. 587)
  1. Establish exclusive and regular business use
  • Photograph the space and note the date. Exclusive use means the area is used only for business (no guest rooms or dual-purpose family rooms).
  • Keep a floor plan showing labeled room sizes and total square footage. Save the calculation files used to derive the business percentage.
  1. Collect receipts and proof of payment
  • Keep receipts, invoices, credit-card statements, and bank records for furniture, repairs, supplies, utilities, internet, and rent/mortgage payments.
  • For shared services (internet, phone, utilities), keep monthly bills and calculate the business portion using a consistent, documented method.
  1. Maintain a usage log when time-based allocation matters
  • If you allocate expenses by time (e.g., shared internet used 60% for business), keep a log showing how you calculated the business percentage.
  1. Document employer reimbursements
  • Save written employer policies or reimbursement agreement showing an accountable plan. Reimbursements under an accountable plan are not taxable and are the cleanest solution for employees working from home.
  1. Track improvements vs. repairs
  • Track whether a payment was for a repair (deductible now) or an improvement (depreciable over time). Keep invoices and contractor documentation.
  1. Keep records for at least three years (longer if audit flags)
  • The IRS commonly recommends keeping records for three years from filing, but keep records seven years if you claim depreciation or have net operating losses, and save supporting documents longer if under audit.

How to calculate business-use percentage correctly

  • By area: (home office square footage) ÷ (total finished square footage of home). Use consistent measurement methods (internal wall-to-wall). Save the floor plan and calculation sheet.
  • By rooms: If rooms are similar in size and one room is exclusively for business, the percentage may be the number of business rooms ÷ total rooms—only if sizes are comparable. When in doubt, use square footage.

Example from practice: A client with a 1,200 sq ft condo and a 150 sq ft dedicated office used 150 ÷ 1,200 = 12.5% as the business percentage and applied that ratio to utilities and rent for the actual-expense method.

What to record by expense type

  • Mortgage interest or rent: Keep monthly statements; apply business percentage for the regular method. Mortgage interest still appears on Schedule A for homeowners; the home office share is claimed on Form 8829.
  • Utilities (electric, heat, water): Keep monthly bills for the year and apply the business percentage.
  • Internet and phone: Separate a dedicated business line if possible. Otherwise, keep bills and a monthly allocation method (percentage of business use).
  • Repairs and maintenance: Save contractor invoices and note whether the work benefited the whole home or just the office.
  • Furniture and equipment: Keep receipts; determine whether to expense (Section 179 or de minimis safe harbor if applicable) or depreciate larger purchases.
  • Depreciation: If you use the regular method and claim depreciation, maintain the basis, acquisition date, and depreciation schedules.

Forms and where to report the deduction (federal)

  • Self-employed taxpayers: Report income and business expenses on Schedule C (Form 1040). Claim home office expenses using Form 8829 (Expenses for Business Use of Your Home) unless using the simplified method. The resulting allowable deduction flows to Schedule C. (IRS Form 8829, Pub. 587)
  • Employees: No federal home office deduction for most W-2 employees. Encourage obtaining employer reimbursements under an accountable plan instead; save employer statements.

State taxes: Some states preserve deductions for unreimbursed employee expenses even though federal law does not. Check state rules and keep the same documentation for state filings.

Audit risks and best defenses

Common audit triggers:

  • Rounded or estimated business percentages with no supporting floor plan or measurements.
  • Claiming exclusive use of shared areas (guest room, dining table) without evidence.
  • Big year-to-year swings in the deduction amount without documented changes.

Audit defenses you should keep:

  • Date-stamped photographs of the office showing it is set up exclusively for business.
  • Floor plan and measurement worksheet.
  • Receipts and bank/credit card statements that match claimed expenses.
  • A contemporaneous business calendar or log showing regular use.

See our related article on what the IRS typically looks for in small-scale home office audits for additional detail and examples: What the IRS Looks for in Small-Scale Home Office Audits.

When the simplified method is smarter

Choose the simplified method if you want low documentation burden and have a small office (under 300 sq ft) or if you prefer to avoid depreciation bookkeeping. It reduces paperwork but may yield a smaller deduction for higher-cost homes or when large, depreciable assets are part of the office.

For more on the choice between simplified vs. regular calculation approaches, see: Home Office Deduction: Simplified vs Regular Method Explained.

Common mistakes to avoid

  • Claiming an office that is not used exclusively for business.
  • Failing to document how shared services (internet, phone) were allocated.
  • Confusing repair vs. capital improvement and mishandling depreciation.
  • Assuming W-2 status allows a federal deduction—most employees cannot claim it.

I regularly see clients attempt to claim a percentage for a multi-use room without contemporaneous proof—this is where quick photos and a dated floor plan prevent disputes.

Practical recordkeeping tools and habits

  • Use a single business bank account and credit card for business expenses.
  • Scan receipts monthly and save digital copies; use bookkeeping software (QuickBooks, Wave, or a secure Google Drive folder).
  • Keep a short written statement describing each expense’s business purpose.

For employees seeking a clean approach: request an employer reimbursement under an accountable plan and retain the employer’s written policy. This eliminates the need for a personal home office deduction on the federal return.

Closing checklist before filing (short)

  • Confirm you are eligible to claim the deduction.
  • Select simplified or regular method and prepare supporting calculations.
  • Save floor plans, photos, bills, receipts, and logs.
  • If self-employed and using the regular method, complete Form 8829 and attach to Schedule C.
  • Retain records for at least three years; longer if you claimed depreciation.

Professional disclaimer

This article is educational and not individualized tax advice. Tax rules can vary by state and change over time. For a personalized review, consult a qualified tax professional or CPA—especially if your situation involves mixed-use space, shared households, or complex depreciation.

Additional reading from FinHelp

Author: Senior Financial Content Editor & CPA (FinHelp). Sources include IRS Publication 587 and Form 8829; check the IRS website for live updates to 2025 rules.