1. The home office deduction is only for the self-employed
Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), employees who worked from a home office for the convenience of their employer could claim the home office deduction. But the TCJA eliminated most miscellaneous itemized expenses, including unreimbursed employee expenses like home offices.
This means you must be self-employed to take this tax break, either as a sole proprietors, a partner, or a member of an LLC. If your business is a corporation, you cannot claim the home office deduction because you are an employee of the corporation in the eyes of the IRS.
2. Not every home office qualifies
- Regular and exclusive use. You must use your home office exclusively for conducting business. If you work on a laptop at a kitchen counter that you also use for preparing meals, you can't take a deduction for your kitchen. But you don't need a dedicated room – a desk in the corner of your bedroom counts if that space is used regularly and exclusively for work.
- Principal place of business. Your home office must be your principal place of business. If you typically work from another location and occasionally work from home, you don't qualify. You can sometimes work elsewhere, such as a coffee shop, client's office, or coworking space.
3. You choose how to calculate the home office deduction
The IRS offers two methods, outlined in Publication 587, for calculating the home office deduction:
- Simplified method. The simplified method allows you to take a deduction of $5 per square foot used for business, up to a maximum of 300 square feet.3 Using this method, a 150 square foot office would result in a $750 deduction.
- Regular method. The regular method requires you to track all the costs of maintaining your home and multiply them by the percentage of your home used for business. For example, if your home office takes up 10% of the total square footage of your home, you can deduct 10% of your home expenses (more on those in the next section).
You can use either method each year, whichever results in a higher deduction.
4. You can claim several expenses under the home office deduction
If you use the regular method to calculate your home office deduction, you can deduct a portion of your housing expenses. The amount you can deduct is based on the percentage of your home's square footage used for business. The types of costs you can partially deduct include:
- Mortgage interest and mortgage insurance premiums
- Rent payments
- Property taxes
- Internet service
- Homeowner's insurance premiums
- Homeowner's association fees
- Repairs and maintenance
- Pest control
You can also deduct 100% of any direct expenses – i.e., those that apply only to your home office. For example, if you repaint your home office and install bookshelves, you can deduct 100% of those costs.
5. Where you claim the home office deduction depends on your business structure
There are a few ways to claim the home office deduction.
- Sole proprietors and single-member LLCs (i.e., only one owner) claim the home office deduction on Schedule C.4 For the simplified method, enter the square footage of your home, the square footage of your home office, and your calculated deduction on Line 30. For the regular method, you'll need to calculate your deduction on Form 88295 and enter the result on Line 30 of Schedule C.
- Partnerships and multi-member LLCs (i.e., more than one member), can use a worksheet in Publication 587 to help calculate the deduction. You enter the result as an unreimbursed expense in Part II of Schedule E.6