What Is the Home Office Deduction? Who Can Actually Claim It

The home office deduction lets you deduct a portion of your rent, mortgage interest, utilities, and insurance if part of your home is used regularly and exclusively for business. It's one of the most misunderstood deductions — and since 2018, most remote employees can no longer claim it at all.

Who Can Actually Claim It?

Since the 2017 Tax Cuts and Jobs Act, W-2 employees cannot deduct home office expenses on their federal return, even if their employer requires them to work from home. The deduction is only available to self-employed people, freelancers, independent contractors, and small business owners who file a Schedule C (or equivalent for their business structure).

The 'Regular and Exclusive Use' Test

The space must be used regularly and exclusively for business — a spare room used only as your office qualifies; a kitchen table you also eat dinner at does not. The space also generally needs to be your principal place of business, or a place where you regularly meet clients, even if you have another primary business location.

Two Ways to Calculate the Deduction

• Simplified method: $5 per square foot of office space, up to 300 square feet — a maximum deduction of $1,500. No records of actual expenses required.
• Regular method: Calculate the percentage of your home used for business (e.g., a 150 sq ft office in a 1,500 sq ft home = 10%), then deduct that percentage of rent or mortgage interest, utilities, homeowners insurance, repairs, and depreciation.

Simplified vs. Regular: Which Should You Choose?

The simplified method is easier and requires far less recordkeeping, but often produces a smaller deduction for people with high housing costs or large office spaces. The regular method usually saves more money if your home expenses are high relative to your home's size, but requires you to track and retain receipts and calculate depreciation, which can also affect your gain when you sell the home.