The professional restrictions that resulted from COVID-19 may have passed, however, remote work has remained an ever-present feature of the post-pandemic employment arena. With over 22 million Americans working remotely, understanding the tax deductions available for home offices is more relevant than ever.
The eligibility criteria and rules surrounding home office tax deductions for remote workers are far from straightforward, however. In this article, we examine remote work home office tax deductions in 2025 and provide a clear overview of who qualifies. This includes what expenses can be claimed, and how firms like Harness can maximize your home office deductions efficiently and compliantly.
Table of Contents
- Am I eligible for home office tax deductions?
- What home office deductions can I claim?
- Home office space deductions
- Business equipment deductions
- Travel expense deductions
- Vehicle mileage deductions
- Business meal deductions
- License fee deductions
- Health insurance deductions
- Retirement contribution deductions
- How do I claim home office tax deductions?
- How Harness can help
- FAQs
Am I eligible for home office tax deductions?
You may work from home; however, understanding your employment classification within that is central to determining your eligibility for home office deductions. The Tax Cuts and Jobs Act (TCJA) of 2018 created a distinct divide between home workers and the deductions they can claim.
Self-employed individuals, including freelancers, independent contractors, and small business owners, retain broad access to federal deductions for legitimate business expenses.
W-2 remote employees, however, are largely barred from claiming federal home office deductions. Limited exceptions are made for specific professions, including performing artists, government officials, and military reservists, who can still qualify under certain circumstances.
While federal avenues place broad home office deduction restrictions for W-2 employees, opportunities may arise at the state and local levels. Certain jurisdictions, including California, Illinois, Iowa, Massachusetts, Minnesota, Montana, New Hampshire, New York, North Dakota, Pennsylvania, South Dakota, the District of Columbia, and the city of Seattle, allow for deductions of unreimbursed employee expenses on state or city tax returns.
Individuals with dual income streams—both W-2 employment and self-employment—can deduct expenses related to their self-employment activities. In these situations, thorough record-keeping is essential to ensure a clear separation of expenses.
The deductions restrictions imposed by the TCJA will last through 2025. Although the TCJA is set to expire this year, the new Trump administration has vowed to extend the Act. Either way, it’s important for remote workers to recognize that eligibility and specific deduction rules vary significantly by location.
W-2 employees are advised to consult with local tax authorities or qualified tax professionals to clarify their eligibility and understand the specific requirements applicable to their situation.
What home office deductions can I claim?
For remote workers who meet the necessary Internal Revenue Service (IRS) criteria, a range of home office deductions allow them to claim a portion of their housing expenses.
These claims directly correlate to the percentage of their residence used exclusively and regularly for business purposes. These deductions cover a range of costs, including mortgage interest, rent, utilities such as electricity, gas, and water, property taxes, and homeowners or renters insurance.
Home office space deductions
To qualify for home office deductions, the designated space must function as the principal place of business, meaning it’s where the majority of your business activities are conducted. The space must also be used solely for business purposes—a dedicated room, for instance, qualifies, whereas a shared living area does not.
Both homeowners and renters are eligible for this deduction. Homeowners can deduct mortgage interest and depreciation, while renters can deduct a proportion of their rental payments.
When evaluating home office expenses, there are two main methods that individuals can use:
The standard method requires the detailed calculation of actual expenses attributed to your home office. This method is preferable if your workspace occupies a significant portion of the home. A larger dedicated area translates to a higher percentage of business use, increasing the potential deduction.
Additionally, the standard method is better for individuals with substantial home-related expenses, such as mortgage interest, property taxes, or homeowners insurance. Applying the business use percentage to these costs can result in a more substantial deduction.
The simplified method offers a straightforward $5 per-square-foot deduction, capped at 300 square feet. The simplified method is preferable for those with smaller workspaces, such as a single room or corner setup, where the standard method’s percentage-based calculation would yield a minimal deduction.
Similarly, individuals with lower home-related expenses, like mortgage interest or property taxes, may find the simplified method’s flat-rate deduction comparable to, or even more advantageous than, the standard method.
Whichever method you choose, it’s advisable to use tax software or consult a tax professional to ensure accuracy and compliance with IRS regulations.
Business equipment deductions
The deduction for business equipment covers the costs associated with acquiring and maintaining tools essential for generating income. This includes a broad range of items, such as computers, laptops, monitors, printers, scanners, office furniture like desks, chairs, and filing cabinets, as well as general office supplies such as paper, ink, and pens.
To claim business equipment deductions, an individual must demonstrate that the equipment is necessary for business operations and contributes directly to income generation. Detailed records of purchases, including receipts, invoices, and any relevant warranties or service agreements, are required.
Business equipment may also be subject to depreciation over time, allowing for the deduction of the asset’s declining value over its useful life. This requires a detailed understanding of IRS depreciation schedules and methods, with precise documentation needed to substantiate the business use of these items and to calculate their depreciation accurately.
Travel expense deductions
Travel expenses incurred for business purposes (such as meeting clients or attending conferences) are also deductible. These expenses include transportation costs including flights, train fares, bus fares, and rental cars, as well as lodging and related expenses such as taxis and ride-sharing services.
To qualify for this deduction, the travel must be “away from your tax home,” typically requiring an overnight stay. Detailed records of travel, including dates, destinations, the business purpose of the trip, and receipts for all expenses, must be carefully maintained.
The IRS has specific rules regarding what constitutes legitimate business travel. It’s important to be familiar with these rules to ensure compliance and reduce the risk of an audit.
Vehicle mileage deductions
Home office tax deductions also include the cost of using a vehicle for business purposes. Taxpayers can choose to deduct either the actual expenses of operating the vehicle, including gas, maintenance, and insurance, or use the IRS standard mileage rate, which simplifies record-keeping by providing a fixed rate per mile.
Detailed records of business miles driven, including the date, destination, and purpose of each trip, need to be kept. When using the actual expense method, additional vehicle-related expenses, such as insurance, registration fees, tolls, and parking, may also be deductible. It’s important to accurately separate personal and business mileage to avoid any discrepancies.
Business meal deductions
Business meals with clients, associates, or potential clients are deductible at 50% of the cost, provided they are directly related to business activities. This includes meals during business meetings, networking events, or client consultations.
As with all deductions, detailed records of the meals, including the date, location, attendees, and business purpose, must be maintained. The IRS requires that the meals be reasonable and necessary for business purposes and that the taxpayer be present or a representative of the business.
Along with dates and locations, it’s important to document the specific business discussions that took place during the meal to substantiate the deduction.
License fee deductions
License fees required for professional or business operations, including professional licenses such as medical, legal, or accounting licenses, business operation licenses, and software subscriptions, are deductible. However, the licenses must be directly related to business activities.
Licenses for personal use, such as magazine subscriptions or recreational activities, are not deductible. It’s important to maintain records of all license fees paid, including dates, amounts, and the purpose of the licenses to ensure that only legitimate business expenses are claimed.
Health insurance deductions
Self-employed individuals can deduct health insurance premiums for themselves, their spouses, and their children under 27. Eligible insurance includes medical, dental, and vision insurance, as well as some long-term care policies and Medicare premiums.
This deduction is subject to certain limitations and cannot exceed net self-employment income. Again, it’s vital to keep accurate records of all health insurance premiums paid and to understand the specific rules and limitations that apply.
Retirement contribution deductions
Contributions to retirement plans, such as SEP IRAs, Solo 401(k)s, and SIMPLE IRAs, offer significant tax advantages by reducing taxable income. These plans allow self-employed individuals to save for retirement while lowering their current tax liability.
Contribution limits vary depending on the type of plan. Individuals should familiarize themselves with the rules and regulations governing these plans and make contributions within the allowable limits.
How do I claim home office tax deductions?
When claiming home office deductions, two key tax forms are involved: Schedule C and Form 8829.
Schedule C is required for those using the simplified deduction method (mentioned earlier).
Form 8829, on the other hand, is used for the detailed calculation and itemization of home office expenses, and consists of four parts.
Part 1 guides you in determining the business percentage of your home by calculating the square footage dedicated to business use relative to the total square footage.
Part 2 involves the listing of business income and deductible expenses, leading to the calculation of total allowable expenses for home business use.
Part 3 deals with the depreciation of the business portion of your home, with instructions provided for determining the allowable depreciation percentage.
Part 4 allows you to identify any expenses that can be carried forward to the subsequent tax year.
In any event, consulting a tax professional is highly recommended to gain clarity on deductions regarding remote work. Beyond determining your eligibility for home office deductions and minimizing your tax burden, a tax professional can advise on longer-term strategies, such as establishing a defined benefit pension plan. They can also help with implementing a rental arrangement for business use of owned property.
How Harness can help
At Harness, we can connect you with a qualified tax professional who’ll provide personalized guidance and proactive tax planning based on your precise circumstances. Our advisors will help you maximize your deductions, reduce your tax liability, and provide ongoing strategies to keep you both tax-efficient and IRS-compliant.
Find your tax advisor at Harness
Book a call with one of our advisors.
FAQs
Below are the most frequently asked questions about home office tax deductions
Who can deduct home office expenses in 2025?
Primarily, self-employed people, including freelancers, independent contractors, and small business owners, are eligible to deduct home office expenses. Most W-2 employees are not eligible for federal deductions, though exceptions may exist at the state and local levels.
What is the simplified home office deduction?
The simplified home office deduction allows you to deduct $5 per square foot of your home office, up to a maximum of 300 square feet. It simplifies the calculation process in comparison to the standard method.
What types of expenses can I deduct as a self-employed individual?
You can claim business deductions for both direct business expenses, such as office supplies, and deduct indirect expenses, which are a portion of your home expenses like rent, utilities, and real estate taxes.
What qualifies as a legitimate home office space for deductions?
The space must be used exclusively and regularly for business purposes and be your principal place of business. It must be where you conduct substantial administrative or management activities for your business.
How do I choose between the standard and simplified deduction methods?
Consider the size of your home office and your home-related expenses. The simplified method is often better for smaller spaces and lower expenses, while the standard method may be more beneficial for larger spaces and higher expenses.
What records do I need to keep for home office deductions?
Meticulous record-keeping is vital. Maintain receipts, invoices, logs of business use, and documentation of all expenses related to your home office.
Can I get a tax break for my home office if I’m a W-2 employee?
Generally, no. The 2018 Tax Cuts and Jobs Act (TCJA) eliminated most federal home office deductions for W-2 employees. However, some states and cities may offer a tax break on state or local tax returns for certain unreimbursed employee expenses.
Tax related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.
Content should not be regarded as a complete analysis of the subjects discussed. Certain information contained herein has been obtained from third party sources and such information has not been independently verified by Harness Wealth. No representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information. Harness Wealth does not assume any responsibility for the accuracy or completeness of such information. Harness Wealth does not undertake any obligation to update the information contained herein as of any future date.
