Do you have 1099 income?
This includes any freelancing, small business, and self-employment income over $600 / year.
For your 1099 work, do you commute to an office?
If you already have an office space that you have to pay for, then select “No”.
Do you work from home regularly ?
Think specifically about your 1099 work.
Do you have a dedicated workstation at home?
Only select yes if you work from home at least once per month.
You don’t qualify for a home office. However, you can still claim plenty of other write-offs, and you should download Keeper Tax.
You can claim home office write-offs!Start over
Here are some examples of tax write-offs you can claim:
A desk, chairs, lamps, and other home office necessities are all tax write-offs.
Your Comcast bill is a tax write-off. You need internet to do your job!
Whether you pay rent or own your home, a portion of it is tax-deductible.
Gotta keep the lights on in your home office! A portion of your electricity bill counts.
It'd be hard to work in an office without running water, huh? You water bill counts.
Whether you pay rent or own your home, a portion of those expenses is tax-deductible.
Working from home is a beautiful thing. That is, until you see your first electricity bill and your heart drops to your stomach.
While it’s more affordable than renting a separate office space, working from home isn’t cheap. Luckily, there is a tax write-off that can help alleviate these pains: the home office deduction.
The home office deduction lets self-employed people who work from home write off a portion of their living expenses on their taxes.
Here’s the rationale: If someone pays for an outside their home, it would be a no-brainer write-off. So why shouldn’t people get a tax break if they spend money repurposing part of their home as a workstation?
So if you have a designated workspace in your home, you might be eligible to write-off part of what you spend on housing. Let’s take a closer look at who qualifies.
As nice as it sounds to write off rent on your taxes, not everyone is allowed to. To qualify for this write-off, you:
You have to meet all four of these rules. Let’s look at them, one at a time:
The home office deduction is a business write-off, so you need self-employment income to claim it. That can mean you work as a:
Your self-employment work can be a side hustle
Any kind of self-employment works. It doesn’t need to be your main source of income — a side hustle is fine.
For example, pretend you’re an editor who works remotely for an online magazine. On your own time, you earn some money self-publishing books on Amazon. Even though your indie author side hustle is a small portion of your income, it still qualifies you to claim the home office deduction.
Your self-employment work should require an office
To qualify for the deduction, your self-employed work should be the type of thing you can’t do without some kind of office space. Not all work counts.
Compare that with a plumber, who spends most of his day out at client stops, but uses his desk to schedule appointments, handle invoices, and order parts and supplies.
The second very clearly needs a home base for operations, and the first does not.
Traditional employees don’t qualify
W-2 workers aren’t eligible to take this deduction. That is, unless they:
First things first, let’s define our terms. What counts as a “work area”?
Believe it or not, a work area does not need to be a separate room. Any of the following examples count:
Your work area should be used exclusively for work
Whatever portion of your home you’re trying to claim, the key is that it’s designated for your work.
Rule of thumb: As long as your area is primarily reserved for business purposes, you’re in the clear.
Life is messy. Even people with offices outside the home can’t avoid having the two mix. If you take the occasional personal call at your desk or hide Christmas presents from the kids in your space, that won’t disqualify you.
However, something like the kitchen table doesn’t count. Or the living room desk where your kids sometimes do their homework. If it’s a shared space between your work life and your personal life, it can’t be used for the deduction.
Exceptions to the “exclusive use” rule
There are two notable exceptions to this requirements:
I’ve worked with people who have been missing out on the home-office deduction for years because they didn’t realize storage counted. Say you keep any of the following in your home:
In that case, it doesn’t matter if you use the space exclusively for work. The only requirement here is that your home is the only location for your business. That means you can’t have another location where you can store your goods.
For example, say you sell your own furniture on Etsy. If you store your woodworking tools and other supplies in your garage, you can claim that space as a home office. It doesn’t matter that you use it for personal storage too.
The same is true if you’re an eligible daycare provider: you don’t have to have an exclusive area of your home reserved for your work. (The method of determining your business-use percentage will be different from what’s described below, however.) If you think this might apply to you, refer to page 12 of the IRS instructions for more guidance.
This is the vaguest rule of them all. The IRS doesn’t provide a clear definition for what “regular use” means. However, if you only use your space a few times a year, that’s not going to fly.
Rule of thumb: You should be using your space weekly, or several times a month — whatever is consistent with your industry.
For instance, if you make and sell fireworks, you might only use your space for a few months during the summer. That’s okay, given that your industry tends to be seasonal anyway.
What if you don’t use your space the entire year?
That’s okay! You aren’t required to use it year-round to claim it.
If you start a business in March and decide by August that you’d rather go back to a W-2 job, you can claim your home expenses for the months of March to August. (More on this below!)
This is another rule that people sometimes trip over. You can only claim the home office deduction if you don’t have access to an office outside of your home.
If you periodically do your work at a coffee shop, that won’t disqualify you. But if you have a WeWork membership, no home office deduction for you!
However, there are two exceptions to this rule.
Exception for client meetings
If you regularly meet with clients in your home, you can have other work locations outside of your home.
For example, let’s say you work as a massage therapist and regularly see clients at home. Three days a week, you freelance at a local spa and have access to one of the rooms while you’re there.
Since you conduct much of your regular business through your home office, you can still claim the deduction. It’s integral to your business.
Exception for office space at your day job
The “no other office” rule also doesn’t apply to offices that aren’t yours.
In other words, if you have an office through your W-2 job, that wouldn’t disqualify you from claiming a home office deduction for your freelance work. (Your boss would probably rather you keep the side hustle at home anyway.)
Now for the fun part! Writing off your home expenses on your taxes. All of the following costs can be included in your home office deduction:
These expenses are very similar to your other business write-offs. Not only do they directly lower your self-employment tax, but they’re also trackable in the Keeper app as well!
So if you’re feeling uncertain about what might count, let us take the guesswork out of it. Our software will scan your bank and credit card accounts for every eligible home office expense. When it’s time to file, simply answer a few questions about your home office, and we can handle the rest.
Tax filing for freelancers and side hustlersGet started→
The amount of each expense you can write off depends on whether it’s a direct or indirect cost for your home office. Let’s talk about the difference between them.
Indirect costs are partially tax-deductible
I’m going to burst the bubble now: you can’t write off your entire rent for the year. That’s because it’s an indirect home office expense.
An indirect cost is something you pay for your entire home — it’s not localized to your workspace. Most of the items listed above are indirect costs.
For these types of costs, you can’t write off the entire amount you pay. Your deduction is limited to the portion of the expense that’s actually going towards your office, as opposed to the other parts of your home. (This is called your “business-use percentage,” which we’ll get into down below.)
Direct costs are 100% tax-deductible
A direct cost is something exclusively for your work area — which means you can write off 100%.
For instance, if you redo the light fixtures in your basement, which you’ve converted into a home office, you get to deduct the whole amount it cost you.
Here are some other examples of direct costs:
Some write-offs are allowed if you regularly use your home office to meet with clients. (These meetings have to be in person: a Zoom call won’t cut it.)
If you often take meetings a home, you could write off a portion of expenses like:
These sorts of expenses can make clients feel more comfortable visiting your home — after all, no one likes finding tree sap on their windshield from an unpruned branch.
More importantly, they protect the business owner from lawsuits. If the pothole on your drive causes damage to a client’s car, or if the overgrown shrubbery causes someone to trip, you could be held liable.
While anyone meeting clients in their home should have liability insurance, preventative measures like landscaping and home improvements will minimize your risk of needing it.
If you don’t take regular meetings at home, however, I wouldn’t advise trying to claim any of these costs. They only become necessary when you have a client-facing office.
Every living setup is a little bit different, and each industry has its own needs. That means there could be costs that apply in one situation and not another.
Here are a few job-specific home office deductions:
Your home office deduction is limited to either:
Which one? It depends on which of two possible methods you use for taking this deduction. We’ll get into that soon, but there’s one other rule you have to know.
The upper limit of your deduct is the amount you’re earning from self-employment after expenses.
For example, if you have $500 of business income and $400 of business expenses, the most you could get from your home office deduction is $100.
If you have $500 of business income and $500 of business expenses, your home office deduction would be $0.
If you don’t qualify this year, you can claim it next year
Good news: If your net income is too low to take a home office deduction, that write-off isn’t lost to you forever. Earn enough the following year, and you can claim it then. (This is called “carryover,” and we’ll get into it more later.)
For instance: Imagine your business has no income this year after subtracting your other write-offs. You wouldn’t be allowed to use your home office deduction. But you can roll it over to use on next year’s return.
If you have too much self-employment income —- a good problem to have! — your home office deduction is a great way to lower self-employment taxes.
There are two ways to claim it. You can either:
Let’s look at the two options in more detail:
This option lets you write off a portion of what you paid during the year, based on how much of your home you used for work. This is the “business-use percentage” of your home.
To find how much you can deduct for each expense, you’ll multiply the amount you spent by your business-use percentage.
Here’s how it works. Let’s say you rent an apartment and pay $800 per month. The apartment is 900 square feet, and the desk space in your bedroom takes up 100 square feet.
That makes your business-use percentage 11%. Multiply that by your monthly rent, and you’ll get to your deduction, $88 (800 x 0.11 = 88). This percentage would be applied to your other housing expenses as well.
When to calculate your deduction using monthly vs. annual expenses
In the example above, I used monthly expenses rather than annual expenses. Here’s how to figure out which figure makes the most sense to use:
For example, say you moved from Alaska to Alabama at the end of March. You’ll use your monthly expense from January to March to calculate the deduction for your Alaska office. And you’ll use your expenses from April to December to calculate your Alabama write-off.
You’ll need to figure out your business-use percentage for each location, and attach multiple copies of Form 8829 to your tax return. (More on this later!)
This usually results in a smaller tax deduction than using the actual method, and it also caps your write-off at $1,500 total. But if you’d rather not deal with math, the simplified home office deduction is for you.
This method gives you a flat rate per square footage of your work area, currently $5. So rather than itemizing all your actual housing costs, you’ll just take the fixed amount put out by the IRS.
Here’s how it works: Using the example above, your 100 foot desk space would result in a $500 deduction (5 x 100 = 500).
Now that you know how to calculate your deduction, let’s take a look at how to claim a home on your tax return:
Because of the unique nature of this write-off, the home office deduction has its own form (separate from the Schedule C you use for most business write-offs). This is Form 8829, “Expenses for Business Use of Your Home.”
You’ll fill out this form if you use the actual method. If you’re choosing the simplified method, you can just claim your home office on Schedule C.
Note that you can use as many of these forms as you need. If you lived in three different places during the year and had three different home offices, you’d complete three separate 8829s — one for each office and corresponding expenses.
Here’s how to claim your deduction. We’ll follow along with a taxpayer called Regular Joe as he fills out his forms.
In the very first section, you’ll get to use the math we discussed earlier in this article and report your business-use percentage.
List the square footage of your workstation on line 1
(Pro tip: A guesstimate is fine — no need to bust out the measuring tape.)
List the total square footage of your home on line 2
Then, just like we talked about, you’ll divide your business space by your total space to determine your business-use percentage.
You’ll carry this down to line 7. You can skip lines 4-6 unless you’re a daycare provider.
The next section of the form is where you’ll list all your applicable housing costs.
🛑 Stop if your net income is zero or less
If that’s the case, you can’t use the home office deduction.
In this example, Joe has $5,000 of net income from his schedule C, so he’s eligible to claim the home office deduction.
Split out your direct and indirect expenses
You’ll notice two columns:
Your direct home office expenses (like painting your office wall) will go in column a. Your general home office expenses (like rent and utilities) will go in column b.
You’ll multiply the total in column by your business-use percentage, then add it to your total in column a.
Divide up your expenses by type
As you can see, there are specific rows for some common housing costs, like insurance and rent. All housing expenses that don’t have their own row will go on line 22, “Other expenses.”.
This is where you’ll calculate any depreciation on your home. If you rent, this section won’t apply to you. This is only for homes that you own.
For instructions on how to calculate depreciation, see the IRS instructions. Better yet, use Keeper. After asking you a few brief questions, our team can calculate the entire home office deduction — including depreciation! — for you.
Lastly, any home office deduction you weren’t able to use last year can be carried over to the current year.
You’ve reached the end of Form 8829, but you’re not done yet!
To write off your home expenses, you’ll need to put the total from line 36 of your Form 8829 on line 30 of your Schedule C.
If you’re using the simplified home office deduction, you can calculate it directly on your Schedule C using line 30.
Now that we’re done walking through this process, we can see how much Joe saved on his taxes.
If he didn’t claim his home office, Joe would have owed $765 of self-employment tax on his $5,000 of net income. After claiming the home-office deduction, he ended up owing only $551 in self-employment tax. That’s $215 in savings!
No, claiming the home office deduction does not increase your audit risk. It’s an extremely common and valid tax write-off.
This is an understandable fear for many people, and I’m happy to put your minds at ease.
That being said, don’t go nuts. Be honest about what you claim, and keep records to support it. If you try to write off more than 50% of your housing costs, that might look fishy. But if you take 20-30% and you have reliable records to back it up, don’t sweat.
What are some examples of reliable records?
Best practice is to keep these records for three years after the date you file your return. And just to stress this again, be honest. If your home office genuinely takes up 50% of your home — claim it! Just understand that it’ll be up to you to prove it was legitimate if the IRS doesn’t buy it.