The home office deduction: who qualifies General information, not advice.

The home office deduction allows qualifying self-employed individuals and business owners to deduct expenses related to the part of their home used regularly and exclusively for business. Most employees who work remotely for an employer currently cannot claim it under federal law — a change that took effect for tax years 2018 through 2025 under the Tax Cuts and Jobs Act and has not been reversed as of this writing. The IRS describes the full eligibility rules in Publication 587.

01The exclusive-and-regular-use rule

Two conditions must both be met for any workspace to qualify:

Exclusive use: the area must be used only for business. A kitchen table where you also eat, or a bedroom with a desk, does not satisfy this requirement. The business area must be a dedicated space — a separate room is easiest to document, but a clearly defined portion of a room can qualify if it is used for nothing else.

Regular use: the space must be used for business on a consistent, ongoing basis. Occasional use does not qualify.

There is a limited exception for certain storage areas and for licensed daycare facilities, but for most taxpayers the rule is strict.

02Principal place of business

For a home office to qualify, your home must be your principal place of business, or you must use it as the place where you meet clients or customers in the normal course of business. If you have an outside office and also do some work at home, the home office generally does not qualify unless the home location is where you perform your most important or time-consuming activities, or the outside office is not regularly available to you.

03Simplified vs actual-expense method

Once you confirm eligibility, you choose one of two calculation methods each year:

You may switch methods from year to year. The simplified method is easier but may produce a smaller deduction for larger home offices with high actual costs. The actual-expense method requires tracking more records but can yield a larger deduction.

Note that deductions under the home office deduction generally cannot exceed your net business income from that activity for the year. Excess amounts may carry forward under the actual-expense method.

04Depreciation and the sale of your home

If you use the actual-expense method, you will depreciate the business portion of your home over time. When you eventually sell the home, that depreciation can affect your gain calculation. This is one reason careful recordkeeping matters from the first year you claim the deduction.

05Why W-2 employees currently cannot claim it

Before 2018, W-2 employees could claim unreimbursed employee business expenses — including a home office — as a miscellaneous itemized deduction subject to a floor. The Tax Cuts and Jobs Act suspended that deduction for tax years 2018 through 2025. If your employer does not reimburse you for a home office, you currently have no federal deduction available as a W-2 employee. This may change if Congress acts on expiring provisions; check IRS guidance for updates after 2025.

Self-employed individuals and those who file Schedule C, Schedule E (for rental activity), or Schedule F are not affected by this suspension.

06Recordkeeping recommendations

Whether you use the simplified or actual-expense method, maintain:

• A floor plan or sketch showing the office dimensions
• Photos of the dedicated workspace
• A log or calendar showing business use
• Receipts for home costs if using actual expenses

Good records protect you if the deduction is ever questioned.

07Where to get help

Determining whether a workspace qualifies and choosing between calculation methods involves facts specific to your home and business. A find a tax professional can review your situation and help you apply the rules correctly.

08Sources

• IRS Publication 587, Business Use of Your Home (irs.gov)
• IRS Form 8829 instructions (irs.gov)
• IRS Topic No. 509, Business Use of Home (irs.gov)

09Who can claim the home office deduction?

The deduction is mainly for self-employed people - sole proprietors, independent contractors, and many gig workers - who use part of their home for business. After recent federal law changes, most employees who work from home cannot deduct home office expenses on their federal return, even when they work remotely full time. The space must pass two tests, described below, and the deduction generally cannot create a business loss beyond limits the IRS sets.

10Simplified or regular method: which should you use?

The IRS offers two ways to calculate the deduction:

The IRS publishes the current simplified rate and the square-foot cap; check Publication 587 for the figures that apply to your tax year. You can choose a different method from one year to the next.

11What counts as exclusive and regular use?

To qualify, the space must be used both exclusively and regularly for business. Exclusive use means the area is not also used for personal activities - a spare room used only as an office qualifies, while a kitchen table used for family meals does not. Regular use means you work there on a continuing basis, not occasionally. The home generally must be your principal place of business, although a separate structure or a space used to meet clients can also qualify.

12How do you report it?

Self-employed filers usually report the deduction on Schedule C. The regular method is calculated on Form 8829, Expenses for Business Use of Your Home, which allocates home costs to the business portion. The simplified method is entered directly without Form 8829. Keep records of your square footage and expenses in case the IRS asks you to support the figures.

13Which mistakes should you avoid?

A few errors draw IRS attention. Claiming a space that is also used personally fails the exclusive-use test. Deducting the full cost of a home expense, rather than the business-use share, overstates the deduction. And switching methods partway through a single year is not allowed. When the rules are unclear for your setup, a qualified professional can confirm what you may claim.

14Can employees ever deduct a home office?

For most W-2 employees, the answer on a federal return is currently no. The deduction for unreimbursed employee expenses, which once covered a home office, is suspended under current federal law, so working from home for an employer does not by itself create a federal deduction. Two routes still help. First, some states allow their own version of the deduction even when the federal one is unavailable, so check your state's rules. Second, an employer can set up an accountable plan to reimburse home office costs directly, which is generally tax-free to the employee and deductible for the business. Income from self-employment on the side is treated separately and may support a deduction for the space used for that work.

15Where to get help

Every home and business is different. To find professionals who handle self-employment and small-business returns, see the recognized professional bodies for the United States.

16Sources

• Internal Revenue Service (IRS) - Publication 587, Business Use of Your Home; Form 8829; Schedule C instructions (irs.gov).