Who Can Claim the Home Office Deduction?
Since the Tax Cuts and Jobs Act of 2017, W-2 employees cannot deduct home office expenses — even if they work from home full-time.
Who can claim it:
- Self-employed individuals (Schedule C filers)
- Small business owners
- Partners in a partnership (via Schedule E)
- Some S-corp shareholders
The “Exclusive and Regular Use” Rule
Your home office must be used:
- Exclusively for business — a desk where you also watch TV doesn’t qualify
- Regularly — not just occasionally
- As your principal place of business OR a place where you meet clients regularly
A dedicated room is ideal. A partitioned area of a room can qualify if it meets the exclusivity test.
Two Calculation Methods
Simplified Method (easier)
- Deduct $5 per square foot of office space
- Maximum 300 square feet = maximum $1,500 deduction
- No depreciation recapture upon selling home
Regular Method (potentially larger deduction)
- Calculate the percentage of your home used for business (office sq ft ÷ total sq ft)
- Apply that percentage to actual home expenses: mortgage interest/rent, utilities, insurance, repairs, depreciation
- Requires Form 8829; more complex but can yield a larger deduction
Example
Office: 200 sq ft. Home: 1,500 sq ft. Home expense percentage: 13.3%.
If annual home expenses total $24,000 (mortgage, utilities, insurance):
- Regular method: 13.3% × $24,000 = $3,192 deduction
- Simplified method: 200 sq ft × $5 = $1,000 deduction
Regular method wins here, but requires more recordkeeping.
Employees Working Remotely
W-2 employees may be able to deduct unreimbursed home office expenses on their state return — some states didn’t conform to the federal TCJA change. Check your state’s rules.