Can I Deduct My Home Office If I’m Working Remotely?

Important: While most remote employees can’t claim the home office deduction on their federal tax return, some states—like California—still allow employees to write off unreimbursed employee expenses, including a home office, on their state tax return. However, there are limitations.

For employees in states that still allow these deductions, it’s essential to keep accurate records of your expenses and calculate whether the deduction makes sense for you. For some employees, it may still provide meaningful tax savings.

Now, if you’re self-employed or own a small business, the home office deduction can be a more straightforward way to reduce your taxes—but you need to meet the IRS rules.

To qualify, your home office must meet two key requirements:

1. Exclusive and Regular Use: The space must be used only for business and on a regular basis. You can’t claim a room if it’s also used for personal activities.

2. Principal Place of Business: Your home office must be the main place where you do business. If you sometimes visit clients or work elsewhere, that’s fine, as long as your home office is your primary location.

There are two ways to calculate the deduction:

• Simplified Method: You can deduct a certain amount of dollars per square foot of your home office, up to a limit.

• Regular Method: This lets you calculate the percentage of your home used for business and apply it to your home expenses, like rent, mortgage interest, utilities, and repairs.

Summary:

• Self-employed? You can claim the deduction if you meet the IRS rules.

• Employee in certain states? You may be able to deduct unreimbursed expenses, but only after they exceed 2% of your AGI, so it’s important to run the numbers.

Check with your accountant to see if you qualify for the deduction and to determine which method works best for you.