Home Business Tax Deductions — Nolo

What tax deductions come with buying a home?

Homeowners can deduct mortgage interest on loans up to $750,000 and property taxes up to the $10,000 SALT cap when they itemize deductions. Points paid on a purchase mortgage are also deductible in the year paid. These deductions only benefit you if your total itemized deductions exceed the standard deduction ($14,600 single / $29,200 MFJ in 2024).

How does the home office deduction work specifically?

The home office deduction requires a space used regularly and exclusively for business. You can use the simplified method ($5 per square foot, up to 300 sq ft = $1,500 max) or the regular method based on actual home expenses proportional to office square footage. The regular method often yields a larger deduction but requires tracking utilities, rent or mortgage interest, insurance, and repairs.

Can I deduct home office expenses?

Self-employed individuals can deduct home office expenses using either the simplified method ($5 per square foot, up to 300 sq ft) or the regular method (actual expenses based on percentage of home used for business). W-2 employees cannot deduct home office expenses under current tax law.

Can W-2 employees deduct a home office?

Generally, no. Under current federal law, employees who receive a W-2 cannot deduct home office expenses, even when they work remotely, because the unreimbursed employee expense deduction is suspended. The home office deduction is available mainly to self-employed people and independent contractors who use part of their home regularly and exclusively for business. If you are a remote employee, ask your employer about a reimbursement or accountable plan instead. A few states have their own rules, so check your state and consult a professional if unsure.