How to write off home office expenses from taxes: requirements and conditions

Many Americans think that because they work from home, they can deduct some of their rent and utility costs from their taxable income. But that's not always the case, explains USA Today.

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Among workers whose jobs can be done remotely, 75% do so at least part of the time, according to the Pew Research Center. Nearly half of those workers (46%) say they would be unlikely to stay at their current job if their employer no longer allowed them to work from home. However, most of them likely don’t qualify for home office tax deductions.

Home office deductions only apply to small business owners and self-employed individuals. If you do freelance work unrelated to your day job, you may qualify. However, the requirements are quite strict, and calculating the deduction can be complicated.

Here's a step-by-step guide to determining if you qualify for a tax deduction and what factors to consider in your calculations.

Who is eligible for home office tax deductions?

Generally, if you receive a W-2 from your employer, you are not eligible for a deduction unless you have additional income from working from home. This rule is true for federal taxes, but local laws may vary. Pennsylvania and New York, for example, allow employees to deduct some of their home office expenses. Check your state's rules.

If you work for yourself and use your home office exclusively and regularly for work, you can deduct some home-related expenses, such as mortgage interest, property taxes, homeowner's insurance, and utilities, from your federal taxes.

On the subject: Nine States Cut Taxes in 2025: Which Regions Will Save Money?

But experts warn that it's important to pay attention to the details.

"If you work at your dining room table, you can't deduct that expense because it's not used exclusively for work," said Teresa Tippy, a tax manager and financial planner at EP Wealth Advisors. "But you can buy a desk, put it in the corner of a room, and if that corner is used exclusively and regularly for work, you can deduct that space."

There are two options for home office tax deductions:

• Simplified (home office deduction)
• Regular direct home office deduction

The simplified one works like this: You can deduct $5 per square foot, up to $1 or 500 square feet per year for space used exclusively as a home office if it is used all year. If the space is used only part of the time, the deduction is prorated.

Normal allows you to deduct a larger amount. However, it requires tracking all home office expenses, including repairs and maintenance costs.

“If you have a spare room and you’ve renovated it to make it an office (installed built-in shelves, painted the walls for Zoom video calls), all of that can be counted as a home office expense,” Tippi said.

You can also claim a tax deduction for some other expenses, such as rent or property taxes, home depreciation, and utilities. The amount of the deduction is determined by the proportion of the office area to the total area of ​​the house.

For example, if your office is 250 square feet and your home is 1 square feet, you can deduct 000% of your home expenses (25/250 = 1). If your home-related expenses were $000, your deduction could be up to $0,25. There is no limit on the amount of the regular deduction.

Can expenses for office supplies and equipment be deducted?

Yes, as long as they are standard for your industry, required for the job, and you have receipts to support them.

Potential deductions include cell phones, laptops, printers and other office supplies.

"With the cost of these items, you can just expense the entire amount," Tippy said. "There's no need to capitalize them. These expenses go under 'Office or Miscellaneous' on Schedule C."

However, if the equipment or accessories are also used for personal needs, then you can deduct only the part that goes to work. For example, if you bought a laptop for $2, but only use it for work 500% of the time, then you can write off $40.

Changes in tax deduction for business lunches

From January 1, 2023, business owners who treat clients to lunch should take into account that the tax deduction for business lunches has returned to the pre-pandemic 50%.

The Tax Relief and Tax Disaster Act of 2020 temporarily increased this deduction to 100% (including taxes and tips) in 2021 and 2022.

Can W-2 employees reclaim some of their home office expenses?

Yes, it is possible through the employer.

“You can try to negotiate with the company to cover these expenses if they require you to work from home,” Tippi said. “The employer may reimburse them and deduct the amount from your taxes. However, some companies may simply require employees to work in the office.”

Read also on ForumDaily:

How to Track Your 2024 Tax Refund and How Much to Expect

What happens if you do not pay taxes in the United States

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