The home office deduction lets self-employed people deduct costs for the part of their home used regularly and exclusively for business. You can choose the simplified method, a set rate per square foot up to a cap, or the regular method based on actual expenses. Most employees cannot claim it on a federal return.
Who 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.
Simplified or regular method: which should you use?
The IRS offers two ways to calculate the deduction:
| Method | How it works | Best when |
|---|---|---|
| Simplified | A set rate per square foot of office space, up to a maximum number of square feet | You prefer minimal recordkeeping |
| Regular | A share of actual home costs (utilities, insurance, repairs, depreciation) based on the part of the home used for business | Your actual costs are high |
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.
What 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.
How 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.
Which 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.
Can 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.
Where 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.
Sources
- Internal Revenue Service (IRS) - Publication 587, Business Use of Your Home; Form 8829; Schedule C instructions (irs.gov).