Can I deduct home office expenses if I work remotely?

by | May 9, 2025 | Deductions, Individual Taxes

Here’s what HIVE AI had to say about “Can I deduct home office expenses if I work remotely?”:

Home Office Deduction for Remote Workers

Yes, you can deduct home office expenses if you work remotely, but there are specific requirements you must meet to qualify for this deduction. The IRS has strict rules about who can claim this deduction and how it can be applied.

Basic Requirements for Home Office Deduction

To qualify for the home office deduction, you must meet two fundamental requirements:

The office area must be used exclusively and regularly for business. Exclusively means you must use the area of your home only for conducting business. If any part of this area is used for personal purposes you have not met the exclusive use test. Regular use means that you use the exclusive business area on a continuing basis. The occasional or incidental business use of an area in your home does not meet the regular use test even if that part of your home is used for no other purpose. IRS IRM 4.10.10 Standard Paragraphs and Explanation of Adjustments

This exclusive use requirement is strictly enforced by the IRS and tax courts. For example, in one tax court case, a taxpayer admitted that the room he used as a home office was not used exclusively for that purpose; it was also used (among other things) as a spare bedroom and exercise room. He therefore was not entitled to any home office deduction. Dawson U.S. Tax Court Opinions: Rick Colbert & Traci Marie Kruse-Colbert

Additional Qualifying Requirements

In addition to the exclusive and regular use requirements, you must meet one of the following criteria:

Special Considerations for Remote Employees

If you’re an employee working remotely (rather than self-employed), there are additional restrictions:

For example, with respect to the business use of a taxpayer’s residence, section 280A provides that in order for allocable expenses to be deductible under that section, the portion of the taxpayer’s residence must be used exclusively by the taxpayer on a regular basis as a principal place of business for the taxpayer’s trade or business, or to meet or deal with patients, clients or customers in the normal course of the taxpayer’s trade or business. If the taxpayer is an employee, the exclusive and regular use of a portion of the taxpayer’s residence must be for the convenience of the taxpayer’s employer before any expenses relating to that part of the taxpayer’s residence may be deducted. Rev. Rul. 2004-32

This “for the convenience of the employer” requirement is particularly important for remote employees. The “office in the home” must be used regularly and exclusively as the employee’s principal place of business for the employer’s convenience. The IRS, as the employer, has determined that each employee’s post of duty (POD) is the assigned IRS office of the employee and that a telework location is for the convenience of the employee rather than for the employer; therefore, the requirements of Section 280A(c)(1)(A) are not met. IRS IRM 1.32.1 IRS Local Travel Guide

This means that if you’re working from home by choice rather than because your employer requires it, you likely won’t qualify for the deduction as an employee.

Calculating the Home Office Deduction

If you qualify for the home office deduction, you have two methods to calculate it:

  • Regular Method: Calculate the actual expenses of your home office. Home office deductions are limited by IRC 280A to the gross income from that business activity reduced by the sum of the percentage of the otherwise deductible mortgage interest, real estate taxes, losses from casualty and theft, and deductions allocable to the business or rental activity but not allocable to the use of the unit itself. IRS IRM 4.10.10 Standard Paragraphs and Explanation of Adjustments IRS IRM 4.10.10 Standard Paragraphs and Explanation of Adjustments
  • Simplified Method: The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses normally required to determine your home office expense deduction. With this method, you will generally figure your deduction by multiplying $5, the prescribed rate, by the area of your home (measured in square feet) used for a qualified business. The area you use to figure your deduction is limited to 300 square feet. IRS – Publication 583: Starting a Business and Keeping Records

Examples of Qualifying Home Offices

To better understand how the home office deduction works in practice, consider these examples:

To make these sales, Alex regularly visits customers to explain the available products and take orders. Alex’s home office qualifies as a principal place of business for deducting expenses for its use. Alex conducts administrative or management activities there and has no other fixed location where substantial administrative or management activities are conducted. The fact that Alex conducts some administrative or management activities in a hotel room (not a fixed location) does not disqualify the home office from being a principal place of business. Alex meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home. IRS – Publication 587: Business Use of Your Home (Including Use by Daycare Providers)

Another example shows how a professional might qualify:

Taylor is a self-employed anesthesiologist. Taylor spends the majority of the time administering anesthesia and postoperative care in three local hospitals. One of the hospitals provides a small shared office where Taylor could conduct administrative or management activities. Taylor very rarely uses the office the hospital provides but instead uses a room at home that has been converted to an office. Taylor uses this room exclusively and regularly to conduct all the following activities: • Contacting patients, surgeons, and hospitals regarding scheduling. • Preparing for treatments and presentations. • Maintaining billing records and patient logs. • Satisfying continuing medical education requirements. • Reading medical journals and books. IRS – Publication 587: Business Use of Your Home (Including Use by Daycare Providers)

Common Pitfalls to Avoid

  • Mixed-Use Spaces: But the “exclusive use” requirement makes section 280A an all-or-nothing statute–if the taxpayer uses the home office mostly for business but also uses it for any other reason, there’s no deduction. Dawson U.S. Tax Court Opinions: Denise Celeste McMillan
  • Telecommuting for Multiple Jobs: Mr. Baveja’s home office was not used exclusively for his real estate activities but was instead also used for telecommuting for his USDA and NASA jobs (for which his home office was not his principal place of business). He is therefore not entitled to any home office deduction. Dawson U.S. Tax Court Opinions: Saurabh Baveja
  • First Telephone Line: Under section 262(b), “any charge (including taxes thereon) for basic local telephone service with respect to the 1st telephone line provided to any residence of the taxpayer shall be treated as a personal expense”. That is, the charge for one’s first phone is a personal, non-deductible expense. Only one’s second phone can be a deductible business expense. Dawson U.S. Tax Court Opinions: Saurabh Baveja

Documentation Requirements

If you claim a home office deduction, you must maintain proper documentation:

To meet the records requirement, you must maintain the following: 1. An account book, diary, or statement of expenses, with entries made at or near the time of each necessary business expense. You must show the amount spent, the time and place of travel, and the purpose of the business. 2. Available documentary evidence that will identify the expense, such as receipts, paid bills, or canceled checks. Estimates do not qualify as substantiation of these expenses. IRS IRM 4.10.10 Standard Paragraphs and Explanation of Adjustments

Conclusion

While the home office deduction can provide valuable tax savings for remote workers, the requirements are strict, particularly the exclusive use test and, for employees, the “for the convenience of the employer” requirement. Self-employed individuals generally have more flexibility in claiming this deduction than employees.

If you’re considering claiming the home office deduction:

  • Ensure you have a space used exclusively and regularly for business
  • Determine if you meet one of the qualifying criteria (principal place of business, client meetings, etc.)
  • If you’re an employee, verify that your remote work arrangement is for your employer’s convenience, not yours
  • Choose between the regular and simplified methods for calculating your deduction
  • Maintain thorough documentation to support your claim

Given the complexity of these rules and the potential for audit scrutiny, consulting with a tax professional about your specific situation is advisable before claiming the home office deduction.

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