What Deductions Can You Claim Working From Home?

The Critical Eligibility Distinction

The most important fact about home office deductions is that W-2 employees cannot claim them on federal taxes following the Tax Cuts and Jobs Act of 2017. Before 2018, employees could deduct unreimbursed home office expenses as a miscellaneous itemized deduction. That provision was eliminated, and it has not been restored.

If you are a self-employed individual, freelancer, independent contractor, or small business owner, you can still claim home office deductions — and they can be substantial. The deduction applies to your Schedule C if you are a sole proprietor, or through the appropriate business entity return if you operate as an LLC or S-corporation.

The Exclusive and Regular Use Requirement

The IRS requires that your home office space be used both regularly and exclusively for business. This is a strict test. A spare bedroom used as an office 40 hours a week but also used by visiting guests fails the exclusivity test — the entire space becomes ineligible. The area doesn't need to be a separate room with a door, but the designated square footage must be used solely for business purposes.

There is one notable exception to the exclusive-use rule: if you use part of your home for day-care facility services or for the storage of inventory or product samples, you may still qualify for a partial deduction even without exclusive use. These carve-outs recognize that certain business uses are genuinely mixed-purpose by nature.

Two Calculation Methods: Simplified vs. Regular

The IRS offers two ways to calculate the home office deduction. The simplified method allows you to deduct $5 per square foot of your home office, up to a maximum of 300 square feet — so a maximum deduction of $1,500. It is easy to calculate and requires no recordkeeping of actual home expenses, but it may understate your actual costs.

The regular (actual expense) method is more complex but often more generous. You calculate the percentage of your home used for business (office square footage divided by total home square footage) and apply that percentage to your total home expenses. Deductible expenses include mortgage interest or rent, utilities, homeowners or renters insurance, repairs and maintenance, and depreciation (for homeowners). A home office occupying 15% of your home's total area allows you to deduct 15% of all these costs.

Expenses Deductible Under the Regular Method

Under the actual expense method, the following costs are partially deductible based on the office-use percentage:

• Rent: The business-use percentage of monthly rent.
• Mortgage interest and property taxes: These are already deductible on Schedule A if you itemize; the home office deduction allows an additional business deduction for the office portion.
• Utilities: Electricity, gas, water, and internet service proportional to office usage.
• Homeowners or renters insurance: The office-use percentage of your premium.
• Repairs: General home repairs are deductible at the office percentage. Repairs exclusive to the office space (repainting just the office) are 100% deductible.
• Depreciation: Homeowners can depreciate the office portion of their home's value over 39 years — potentially a meaningful annual deduction, though it creates a taxable gain upon sale (depreciation recapture).

Direct Business Expenses: Fully Deductible

Certain expenses are 100% deductible regardless of the office percentage because they are used exclusively for business. These include office furniture and equipment (desks, chairs, monitors, printers), business-specific phone lines, dedicated internet service if it is used solely for work, and business software subscriptions.

Under Section 179 expensing and bonus depreciation rules, you can often deduct the full cost of equipment in the year of purchase rather than depreciating it over several years. This can create large upfront deductions for major purchases like computers, cameras for content creators, or specialized equipment.

The Internet and Phone Deduction

Internet and phone expenses present a particular challenge because most people use them for both personal and business purposes. The IRS requires that you deduct only the business-use percentage of these expenses. If you use your phone 60% for business, you can deduct 60% of your monthly bill.

Maintaining a log of business vs. personal usage for a representative period — such as a month — provides documentation to support your claimed percentage. For freelancers and business owners who rely heavily on connectivity, internet costs can be a meaningful annual deduction, particularly in metro areas where high-speed business-grade internet is expensive.

State Tax Considerations

While the federal home office deduction for employees was eliminated in 2017, some states still allow it. New York, California, Pennsylvania, and a handful of others permit employees to deduct unreimbursed home office expenses on their state income tax returns. The rules and thresholds vary by state.

Employees who work from home in these states should research their specific state's rules and potentially itemize on their state return even if they take the standard deduction federally. For self-employed workers, state and federal treatment is generally consistent — the deduction flows through from your federal Schedule C to your state return. Consulting a tax professional familiar with your state's rules is particularly valuable for remote workers who moved across state lines during the year.