Since the start of the Covid-19 pandemic, many individuals have shifted from working in a public office to working from home. Some individuals may receive a home office deduction if they meet the IRS requirements. To be eligible for the home office deduction, individuals must be self-employed, independent contractors, or working in the gig economy. The home office deduction is not available for employees who receive paychecks and W-2s between 2018 and 2025, even if they work from a home office.
Home office requirements:
There are two main requirements that the home office must meet to be deductible.
1. The office must be a portion of the home that is used exclusively for conducting business on a regular basis. If it is used for personal and business activities, it is not deductible.
2. The home must be the taxpayer’s principal place of business. For a home office to be the principal place of business, the business must not have any other fixed location where business is regularly conducted.
The home office deduction is disallowed if an employee rents their home office to their employer.
Individuals who wish to claim the home office deduction must provide evidence of office usage and home office-related expenses.
How to calculate the home office deduction:
The home office deduction can be calculated using the square footage method. With this method, the taxpayer will begin by dividing the square footage of the home office by the square footage of their entire home. This percentage is the portion of the household expenses that may be deducted. The taxpayer will then add the full amount for expenses that are exclusively for their office space.
The IRS offers a simplified method of calculating taxpayers’ home office deductions called the safe harbor method. To calculate a home office deduction using the safe harbor method, taxpayers multiply their office square footage by the prescribed rate. The prescribed rate is currently $5, but the IRS may update it occasionally. The maximum deduction allowed when using the safe harbor method is $1,500. Additionally, the total deductions cannot exceed the income of the business.
Visit the IRS website for more information on the home office deduction.