If you were a W-2 employee in 2024, meaning your employer withheld taxes from your paycheck, you cannot claim a deduction for home office expenses. Prior to 2018, W-2 employees could deduct certain unreimbursed work-related expenses, but this tax break was eliminated under the 2017 Tax Cuts and Jobs Act and won’t be reinstated until at least 2026.

However, you may qualify for the home office deduction if you have a side hustle, are a freelancer, independent contractor, or self-employed worker. To be eligible, you must use a portion of your home regularly and exclusively for business purposes, according to the IRS. This means the space cannot serve dual purposes, such as an office and a guest room.

How to Calculate the Deduction

There are two primary ways to calculate the home office deduction:

The Simplified Option

• This method allows you to deduct a flat rate of $5 per square foot of your home used for business, up to 300 square feet.
• The maximum deduction is $1,500.
• It requires minimal record-keeping and is easier to claim.

The Regular Method

• This approach calculates the deduction based on the actual expenses incurred for the portion of your home used for business.
• It includes a percentage of expenses such as mortgage interest, insurance, utilities, repairs, and depreciation.
• While more complex, it can lead to substantial tax savings if your business-related expenses are high.

The home office deduction can provide a valuable tax break for self-employed individuals, but it necessitates careful documentation and compliance with IRS rules. If you’re uncertain about claiming the deduction, consulting a tax professional can assist you in navigating the complexities of the tax code and avoiding costly mistakes.