How to Maximize Deductions When Working From Home
Working from home creates opportunities to reduce your tax bill through legitimate deductions. Whether you’re a salaried employee (if eligible under special rules) or an independent contractor/owner of a small business, understanding which expenses qualify and how to document them is essential to maximizing deductions and staying IRS-compliant. This guide covers the most commonly overlooked opportunities, recordkeeping best practices, and examples to help you claim the full benefit of home-office and work-related expenses.
Know which tax status applies to you
Self-employed, independent contractor, freelancer, or business owner: You generally may claim the home office deduction and many ordinary and necessary business expenses on Schedule C (Form 1040) or the applicable business tax return.
Employee (W-2): Since 2018, miscellaneous itemized deductions and unreimbursed employee business expenses are suspended for most employees on federal returns. Some exceptions exist (e.g., certain state tax rules, specific employment categories like Armed Forces reservists, qualified performing artists, or fee-basis state or local government officials). Confirm whether your situation allows employee deductions under federal and state law.
Meet the home office requirements
To take the home office deduction, the space must meet two primary tests:
Regular and exclusive use: You must use a specific area of your home regularly and exclusively for business. Occasional or dual-use spaces generally do not qualify.
Principal place of business: Your home office must be your principal place of business, or you must use it to meet with clients/customers in the normal course of business, or it must be a separate structure used exclusively and regularly for business.
Choose between the simplified and actual deduction methods
Simplified method: Multiply the allowable square footage of the qualifying space (up to 300 sq ft) by a standard rate set by the IRS (check current rate for the tax year). This method is easy and requires less recordkeeping but may result in a smaller deduction for larger, high-cost homes.
Actual expense method: Deduct a proportionate share of actual home expenses (mortgage interest or rent, utilities, insurance, repairs, depreciation, property taxes) based on the ratio of business-use square footage to total home square footage. This method often yields a larger deduction for substantial business use but requires detailed records and calculations.
Maximize deductible home-office expenses
Allocate fixed costs: Mortgage interest, property taxes, homeowners insurance, and depreciation can be prorated for the business percentage of your home.
Allocate variable costs: Utilities (electric, gas, internet), homeowners association fees, and routine maintenance/repairs should be allocated between personal and business use in proportion to the business-use percentage.
Document repairs and improvements: Repairs that affect only the home office (e.g., painting that room, fixing wiring) are fully deductible as business expenses. Improvements that benefit the whole home (e.g., new roof) generally must be capitalized and depreciated; allocate the business portion accordingly.
Depreciation: Self-employed taxpayers claiming the actual expense deduction may depreciate the business portion of their home over the IRS-prescribed recovery period. Depreciation can be complex—track basis and improvements carefully and consider consulting a tax professional.
Deduct supplies, equipment, and furniture
Office supplies: Pens, paper, printer ink, postage, and other consumables used for business are fully deductible.
Furniture and equipment: Desks, chairs, computers, and printers used for business can be deducted. Options include:
Expensing under Section 179 (subject to limits and eligibility)
Bonus depreciation (when available)
Regular depreciation over the applicable recovery period
Repairs and maintenance specific to equipment are deductible as business expenses.
Deduct business-use portion of vehicle and travel costs
If you use your vehicle for business (client visits, deliveries), track mileage using a contemporaneous log or use actual expenses with receipts. You may choose the standard mileage rate or actual expense method—pick the one that yields the larger deduction and follow IRS rules consistently.
Travel expenses for business trips (transportation, lodging, meals subject to limits) are deductible when ordinary and necessary and properly documented.
Deduct communication and technology expenses
Business phone lines: The portion of your phone used for business is deductible. If you have a dedicated business line, the full cost may be deductible.
Internet: Deduct the business-use portion of your internet service. If you use it both personally and for work, allocate a reasonable percentage.
Software and subscriptions: Business-related software, cloud storage, and subscription services are deductible when used for business.
Consider health insurance and retirement contributions
Health insurance premiums: Self-employed individuals who meet IRS requirements may deduct health insurance premiums paid for
