Home Office Deduction

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The Tax Cuts and Jobs Act (TCJA) suspended the home office deduction for W-2 employees for tax years 2018 to 2025.

The home office deduction is only available to self-employed people who use their home "regularly and exclusively" for business during the tax year. Regular and exclusive means you must regularly use part of your home solely for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.

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If you qualify, there are two methods for calculating the deduction: the simplified method and the actual method.

Under the simplified method, taxpayers can calculate the amount of their home office deduction by multiplying their business square footage by $5 per square foot, not to exceed 300 square feet.

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Under the actual method, taxpayers can calculate the potential deductible amount by prorating their expenses with their business use.

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Incurred Job-Related Expenses While Working From Home

 

From 2018 to 2025, the TCJA eliminated all miscellaneous itemized deductions subject to the 2% of adjusted gross income (AGI) limit, including the deduction for unreimbursed employee expenses.

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However, check your employer’s reimbursement policy. The expense may be fully reimbursable, or employees may be able to trade a salary reduction for reimbursement of expenses. Salary is fully taxable, but the reimbursement is tax-free if you meet certain criteria.