Millions of people work from home and assume their home office is deductible. For most of them it is not, because the deduction for unreimbursed employee business expenses was suspended and remains so.
If you are an employee receiving a payslip, working from home does not generally produce a deduction — even if your employer requires it, even if you bought the desk.
The deduction is essentially available to the self-employed and to business owners, and it comes with requirements stricter than the intuition.
What changed in 2026
- The employee suspension stayed in place. Unreimbursed employee expenses remained non-deductible at the federal level.
- Employer reimbursement plans grew. Accountable plans reimbursing home office costs became a more common employer response.
- State treatment continued to diverge. Some states allow deductions the federal system does not.
- Hybrid work complicated the exclusivity test. Space used for both employment and a side business raised questions.
Exclusive and regular use
The two tests, and the first is where claims fail.
Exclusive use means the space is used only for business. Not mostly, not primarily — only. A desk in a spare bedroom that is also a guest room does not qualify. A dining table used for work during the day does not qualify.
The space need not be a whole room; a clearly identifiable portion of a room can work. It must be genuinely dedicated.
Regular use means used consistently, not occasionally. A space used for business twice a year does not qualify however exclusive it is.
Additionally, it must generally be your principal place of business, or a place where you regularly meet clients, or a separate structure. For most self-employed people working from home the principal place test is satisfied — including where administrative work is done at home while services are delivered elsewhere, provided there is no other fixed location for that administrative work.
Two calculation methods
|
Simplified |
Actual expenses |
| Basis |
A rate per square unit of space |
Proportion of actual home costs |
| Record-keeping |
Minimal |
Substantial |
| Includes depreciation |
No |
Yes |
| Typical size |
Smaller |
Frequently larger |
| Affects home sale |
No |
Yes, via recapture |
| Capped |
Yes |
By business income |
The simplified method multiplies the qualifying area by a set rate, subject to a maximum area. Almost no record-keeping, and frequently a smaller deduction.
The actual expense method allocates a proportion of mortgage interest or rent, utilities, insurance, repairs, and depreciation, based on the space's share of the home. Larger, and it requires records.
You can generally choose per year, which means running both is worth the effort for a meaningful space.
The depreciation consequence
The detail that matters years later.
Claiming actual expenses includes depreciation on the business portion of the home. That reduces your tax bill now, and when you sell the home, the depreciation you claimed is subject to recapture — taxed as ordinary income rather than sheltered by the residence exclusion.
This is not a reason to avoid the deduction; the recapture is generally less than the benefit received. It is a reason to know it is coming, because it surprises people at sale — see depreciation recapture.
The simplified method avoids it by not including depreciation, which is one reason people choose it despite the smaller deduction.
Common mistakes
- Employees claiming it. Generally not available.
- Space used personally too. Exclusivity is strict.
- Not comparing both methods. They can differ substantially.
- Forgetting depreciation recapture. Arrives at sale.
- Claiming more space than is genuinely dedicated. A common audit point.
- Ignoring the income limitation. The deduction generally cannot create a loss.
- Missing state differences. Some states are more permissive.
FAQ
My employer requires me to work from home. Can I claim?
Generally not federally. Ask about employer reimbursement instead — an accountable plan can reimburse expenses without them being taxable income to you, which achieves a similar outcome.
What if I have both employment and a side business?
The space must be used exclusively for the business to support a claim. Using it for employment as well jeopardises exclusivity, which is an increasingly common problem.
Does this affect the home sale exclusion?
Gain attributable to depreciation claimed is recaptured. The residence exclusion generally still covers the rest, subject to the specific rules.
Which method should I use?
Calculate both. Simplified for a small space with modest home costs; actual expenses for a larger space or higher costs, accepting the record-keeping and the eventual recapture.
Where to go next
For the recapture that arrives at sale, read depreciation recapture. For other self-employment deductions, the mileage deduction, and for the tax structure around self-employment, payroll taxes for the self-employed.
This is general information, not tax advice. Requirements are specific and enforcement is real; consult a qualified preparer.