Can You Write Off Working From Home? What Small Business Owners Need to Know

If you run your business from your kitchen table, spare bedroom, or the tiny corner of your house you've officially declared "the office," you may have wondered:

Can you write off working from home?

The short answer? Potentially, yes.

If you qualify for the home office deduction, you may be able to deduct certain expenses related to using part of your home for your business.

But before you start writing off your entire mortgage, Wi-Fi bill, and weekly grocery run, there are a few rules you need to know.

Let's make this simple.

Can You Write Off Working From Home?

Generally, self-employed business owners may be able to claim a home office deduction when they use part of their home regularly and exclusively for business and meet the applicable IRS requirements.

That "regularly and exclusively" part is important.

Your home office could be:

• A dedicated room

• A converted guest room

• A designated portion of another room

• A separate structure on your property
  

But in most situations, the space needs to be used specifically for your business.

So if your "office" is also the dining room table where your family eats dinner every night, it may not meet the exclusive-use requirement.

The goal here isn't to get creative with deductions. It's to understand which expenses legitimately belong to your business.

RELATED: If you're unsure what else qualifies, read What Counts as a Business Expense?

Who Can Claim the Home Office Deduction?

The home office deduction is generally associated with people who are self-employed and otherwise meet the IRS requirements.

That could include:

• Freelancers

• Consultants

• Independent contractors

• Sole proprietors

• Certain business owners working from home
  

One important distinction: simply working remotely doesn't automatically mean you qualify.

If you're an employee working from home for an employer, the federal rules are different from those that apply to someone operating their own business.

Your business structure and individual tax situation can also affect how deductions are handled, so this is one of those areas where it's worth checking with your tax professional.

What Does "Regular and Exclusive Use" Mean?

This is where a lot of the confusion happens.

Let's say you have a spare bedroom that you use as your office five days a week. Your desk, computer, printer, and business supplies live there, and you use the room for your business.

That's very different from answering emails from your couch while watching Netflix.

For a home office deduction, the IRS generally looks for a space that is used regularly for business and exclusively for that purpose.

You don't necessarily need a Pinterest-worthy office with built-in bookshelves and a perfectly styled desk.

You need a legitimate business space.

What Can You Write Off When Working From Home?

If you qualify, certain home-related expenses may be deductible.

Depending on your situation and the method you use to calculate the deduction, those expenses may include a business portion of things like:

• Rent

• Mortgage interest

• Utilities

• Homeowners or renters insurance

• Certain repairs and maintenance

• Depreciation, when applicable
  

Notice we said business portion.

If your office represents 10% of your qualifying home space, that doesn't automatically mean your business gets to deduct 100% of the electric bill.

That's why keeping good records matters.

What About Internet and Your Phone?

Your internet and phone are another area where business and personal use can overlap.

If you use your internet for both Netflix and client calls, for example, you generally need to determine the portion that's actually related to your business rather than treating the entire bill as a business expense.

The same idea applies to your phone.

Good bookkeeping makes these shared expenses much easier to track and explain later.

For more help keeping your expenses organized, read Record-Keeping Tips for Tracking Business Expenses.

How Is the Home Office Deduction Calculated?

There are generally two ways the home office deduction may be calculated: the simplified method and the regular method.

The Simplified Method

With the simplified option, the deduction is calculated using a prescribed rate based on the square footage of the qualifying home office, subject to IRS limits.

This can be easier because you don't have to calculate the business percentage of every eligible household expense.

The Regular Method

The regular method involves calculating actual eligible expenses and determining the portion attributable to your home office.

It can require more recordkeeping, but depending on your situation, it may result in a different deduction.

Neither method is automatically "better." The right choice depends on your specific situation.

Let's Look at a Simple Example

Imagine your home is 2,000 square feet and you have a 200-square-foot room that qualifies as your dedicated home office.

Your office represents 10% of your home's square footage.

Under an actual-expense approach, that percentage may be relevant when calculating the deductible business portion of certain eligible household expenses.

That's why knowing your office measurements and keeping records of eligible expenses can be so helpful.

You don't want to get to tax season and think, "Wait... how big is that room again?"

Keep Your Home Office Records Organized

If you're going to claim business deductions, documentation is your best friend.

Keep records of things like:

• Rent or qualifying housing expenses

• Utility bills

• Insurance

• Repairs

• Internet expenses

• Office measurements

• Receipts for office-specific purchases
  

And please don't make yourself hunt through 11 months of emails and bank statements at tax time.

A simple system throughout the year makes this so much easier.

Don't Turn Everything in Your House Into a Business Expense

We love a good tax deduction around here, but the goal isn't to find a way to make every dollar deductible.

It's to make sure you're taking the legitimate deductions you're entitled to while keeping clean records to support them.

Just because you work from home doesn't automatically make your:

• Groceries

• Personal furniture

• Entire utility bill

• Home renovations

• Everyday household purchases

When something has both a personal and business purpose, that's your cue to slow down and figure out how it should actually be treated.

Why the Home Office Deduction Is Worth Understanding

If you're eligible, the home office deduction can be a valuable way to recognize some of the real costs of running your business from home.

But even more importantly, learning how deductions work helps you understand the bigger picture of your business finances.

You start seeing the difference between:

"I spent money."

and

"My business had a legitimate deductible expense."

That's a pretty important distinction.

Ready to Make Tax Time a Little Easier?

Knowing whether you can write off working from home is just one piece of getting your business ready for taxes.

If you're tired of wondering what you should be tracking, what you need to save, and whether you're forgetting something important, grab our Ultimate Accounting Checklist.

It gives you a simple way to stay on top of your business finances throughout the year, so tax season doesn't turn into one giant game of "Where did I put that receipt?"

Because taxes are a whole lot less stressful when you've been organized all along. P.S. If you’re not already on our email list, now’s the perfect time to join. You’ll get easy, practical tips delivered straight to your inbox, so managing your business finances feels way less overwhelming (and dare we say, empowering).