Quick overview

Remote work can create real tax opportunities—but also real traps. The most commonly claimed deductions are the home office deduction, a business share of internet and phone, furniture and equipment depreciation or Section 179 expensing, and direct business supplies. The rules and forms you use depend on your employment status: self‑employed taxpayers use Schedule C (or a partnership return), certain S‑corp owners and employees may use accountable plans, and most W‑2 employees cannot claim unreimbursed work‑from‑home expenses on their federal return while the Tax Cuts and Jobs Act (TCJA) suspension is in effect (through 2025) (see IRS guidance at https://www.irs.gov/publications/p587 and https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses).

Who can actually claim these deductions?

  • Self‑employed taxpayers (sole proprietors and many single‑member LLCs) generally claim home office and related expenses on Schedule C and Form 8829 (regular method) or use the simplified option. See IRS Publication 587 (Business Use of Your Home) and Form 8829 instructions (https://www.irs.gov/forms-pubs/about-form-8829).

  • Partnerships and S corporations: the entity may deduct expenses; shareholder‑employees typically handle housing reimbursements or deductions through an accountable plan to avoid personal tax issues (IRS: Accountable Plans https://www.irs.gov/businesses/small-businesses-self-employed/accountable-plans).

  • W‑2 employees: for federal returns, the miscellaneous itemized deduction for unreimbursed employee business expenses (including many home office costs) is suspended through 2025 under the TCJA. A small number of exceptions exist (e.g., certain Armed Forces reservists, qualifying performing artists, fee‑basis government officials). State tax rules may differ—some states still allow employee deductions for work‑from‑home costs. Check your state’s department of revenue for details.

The two home office methods — simplified vs regular

  • Simplified method: Multiply allowable square footage (maximum 300 sq ft) by $5 per square foot. Maximum deduction = $1,500. Simpler recordkeeping, but you cannot claim depreciation using this method.

  • Regular method: Allocate actual business use percentage of home expenses (mortgage interest, rent, utilities, insurance, repairs, depreciation). You typically report these on Form 8829 with Schedule C. This method can yield a larger deduction when your true business share and specific expenses are substantial.

Example: You have a 1,000 sq ft house and a 150‑sq ft home office (15%). Annual mortgage interest, property taxes, utilities and insurance total $20,000. Regular method business share = 15% × $20,000 = $3,000. Simplified method maximum = 150 × $5 = $750. In this case, regular method is more beneficial. (See Pub. 587 https://www.irs.gov/publications/p587.)

Qualifying tests: exclusive and principal place of business

To claim a home office deduction, your workspace must generally meet two IRS tests:

  • Exclusive use: A specific area of the home must be used only for business on a regular basis (exceptions exist for storage of inventory and certain daycare uses).
  • Regular and principal place of business: You must use the area regularly for business and it must be your principal place of business or the location where you meet clients or patients in the normal course of business.

If you also carry on business at another location, your home can still qualify if it’s used regularly for management and administrative tasks and there’s no other fixed location where those tasks occur (Pub. 587).

Common deductible categories for remote work

  • Home office (simplified or regular method) — rent or mortgage interest allocation, utilities, insurance, repairs, depreciation (regular method).
  • Internet and phone — deduct the business portion only; allocate carefully if the same line/service is used for personal purposes.
  • Office supplies and small equipment — pens, paper, ink, business‑only subscriptions.
  • Computers, desks, chairs — either depreciate or expense under Section 179 (subject to limits) when used for business.
  • Professional services — bookkeeping, tax preparation and business consulting tied to your trade or business.

Remember: commuting between home and another work site is generally nondeductible personal commuting.

How S corporations and employers should handle home office costs

If you’re an S‑corp owner or employee, the most tax‑efficient approach is often an accountable reimbursement plan from the employer: the company reimburses documented business costs (home internet, office supplies, home office rent reimbursement in limited circumstances), and the reimbursements aren’t taxable to the employee if rules are followed (IRS: Accountable Plans). If the company doesn’t reimburse, the shareholder‑employee can sometimes arrange an officer’s loan or rental agreement, but those are more complex and require careful documentation and reasonable terms to withstand IRS scrutiny.

Recordkeeping: what to keep and for how long

Keep contemporaneous records for at least three years (some advisors keep seven years): receipts, cancelled checks, invoices, bills, photos of the dedicated workspace, square footage calculations, and mileage logs if you meet clients in person. For depreciation, retain supporting records of basis, dates placed in service, and Form 4562 entries. Good records reduce audit risk and make it easier to choose the correct method each year.

Pitfalls and audit triggers

  • Failing the exclusive‑use test: claiming a couch or open part of a living room as a home office invites questions.
  • Using simplified method inconsistently in ways that understate depreciation impacts on sale of the home (depreciation consequences still apply if you claimed business use under the regular method).
  • Not getting employer reimbursement when an accountable plan would cover the expense.
  • Poor or missing documentation for internet/phone business‑use allocation.

Be mindful that any depreciation you claim on the home office reduces your home’s adjusted basis and can create taxable gain or depreciation recapture when you sell. IRS Pub. 587 and Form 8829 instructions explain how depreciation affects later sales; consult Publication 523 (Selling Your Home) for sale‑related rules.

State tax differences

Several states still permit unreimbursed employee business expenses or have different rules about home office deductions. If you’re a W‑2 employee and your state allows a deduction or credit, you may be able to claim some expenses on your state return even if you can’t on your federal return. Contact your state revenue department or a state‑licensed CPA for specifics.

Practical tips I use with clients

  1. Ask your employer for an accountable reimbursement plan: it’s often the cleanest solution for W‑2 workers who have legitimate work‑from‑home costs.
  2. Measure and document square footage once, save the floorplan photo, and update only when you change the space.
  3. Use a dedicated business credit card for supplies and subscriptions to simplify recordkeeping.
  4. Review whether the regular method or the simplified option will be more advantageous before year end; once you choose the simplified method you can switch later, but depreciation histories differ.
  5. When selling your home, track depreciation taken for any business use—those amounts may be taxable and reduce your Section 121 exclusion.

Real‑world examples

  • Freelancer (Schedule C): Mia is a freelance copywriter who uses 12% of her home routinely and exclusively for writing projects. She uses the regular method to allocate mortgage interest, utilities, and depreciation and reports the business portion on Form 8829 with her Schedule C.

  • S‑corp owner: Raj owns S‑Corp design firm; the company reimburses his documented internet, printer ink, and office chair under an accountable plan. The reimbursements are non‑taxable to Raj and deductible by the corporation.

  • Remote W‑2 employee: Lisa was told to work from home indefinitely; her employer offers a monthly stipend to help cover internet and phone. She keeps receipts. Because federal law suspends employee unreimbursed deductions, Lisa cannot claim unreimbursed home office expenses on her federal return, but she checks her state rules for a possible deduction.

Frequently asked questions (short answers)

  • Can I deduct internet if I work from home? Yes, but only the business portion. Allocate personal vs business use and document it.
  • Which method should I choose: simplified or regular? If your office is small and expenses are low, the simplified method reduces paperwork. If you have high rent/mortgage and significant utilities and depreciation, the regular method often yields a larger deduction.
  • Do I need Form 8829? Use Form 8829 to report business use of home under the regular method on Schedule C; it’s not required for the simplified method.

Important sources and further reading

For step‑by‑step guidance on calculating and documenting home office expenses, see FinHelp’s related guides: Home Office Deduction: Simplified vs Regular Method Explained and Claiming the Home Office Deduction: Rules and Documentation.

Disclaimer

This article is educational only and does not replace personalized tax advice. Tax laws change and application depends on facts unique to your situation. Consult a licensed CPA or tax advisor for advice tailored to your circumstances. FinHelp.io content is current as of 2025 and based on IRS publications cited above.