If it feels like everybody is working from home these days, it’s because they are. The US Census Bureau reports: Between 2019 and 2021, the number of people primarily working from home tripled from 5.7% (roughly 9 million people) to 17.9% (27.6 million people), according to new 2021 American Community Survey (ACS) 1-year estimates released today by the U.S. Census Bureau. Nearly half (48.3%) of workers in the District of Columbia worked from home, the highest percentage of home-based workers among states and state equivalents in 2021. In addition to the District of Columbia, states with the highest percentage of home-based workers were Washington (24.2%), Maryland (24.0%), Colorado (23.7%) and Massachusetts (23.7%). And that’s “primarily” working from home, certainly there are many more on some sort of hybrid schedule.
That’s probably why it is a common query as to whether or not a person can claim the home office deduction. Unfortunately for the W2 employees in the group, they cannot take that write off. Prior to 2018, certain employees could deduct the cost of home office expenses as unreimbursed employee costs (which was included as a miscellaneous itemized deduction, subject to the 2% of AGI threshold). But… the 2017 tax reform law repealed this category of deduction… bummer.
The deduction is available to self-employed people or independent contractors who use a room or some other dedicated space in their home exclusively and regularly as their principal place of business. You don’t have to own your own home; renters can get this tax break too.
If you own your own business, depending on your entity type, there are different approaches to achieving this deduction properly.