Home Office

What is a home office?

A home office is a space in a residence set aside for conducting business. It can serve self-employed individuals, independent contractors, small-business owners, and people who telecommute for an employer. When used for business, a home office can also affect tax treatment of certain home expenses.

How it works

A home office typically includes a desk, chair, computer, reliable internet, and any software or equipment needed to perform work and communicate remotely. People use a dedicated room or a clearly defined area in the home; separate structures on the property (garage, studio, etc.) can also qualify.

Remote work and affordable digital tools have made home offices common across many professions, helping smaller businesses avoid the cost of leasing and furnishing commercial space.

Advantages

• Eliminates or reduces commuting time and travel costs (estimated potential savings vary widely).
• Offers schedule flexibility and better work–life balance.
• Can improve productivity and reduce employer costs when workers telecommute.
• Lowers overhead for small businesses that otherwise would lease office space.

Tax benefits and rules

Self-employed taxpayers, independent contractors, and small-business owners who use part of their home for business may qualify for the home office deduction. Key points:
– The space must be used regularly and exclusively for business.
– The home must be the principal place of business, though some business activity outside the home does not automatically disqualify it.
– Deductions are based on the percentage of the home used for business (square footage method).
– Qualified expenses can include a portion of rent or mortgage, utilities, and other related home expenses.
– Employees of a company generally cannot claim the home office deduction.

Practical item: IRS Form 8829 (Expenses for Business Use of Your Home) is used to help determine and calculate allowable deductions.

Employer perspective

Allowing remote work can reduce employer expenses such as rent, utilities, food services, and other costs associated with maintaining a physical office.

How the IRS defines “home”

For tax purposes, “home” includes a house, apartment, condominium, mobile home, or boat. It also covers separate structures on the property (for example, an unattached garage, studio, barn, or greenhouse) when they meet the business-use requirements.

Home office as a corporate term

Separately, “home office” can refer to a corporation’s administrative headquarters—the central office that oversees regional or branch locations.

Bottom line

A home office is a designated area in a residence used for business. Beyond providing a functional workspace, it can offer flexibility, cost savings, and potential tax deductions for qualifying taxpayers who meet IRS requirements for exclusive and regular business use.