As a wave of remote work continues to shape our professional lives, many are wondering how to make the most of their work-from-home setup, especially when it comes to taxes. If you're using TurboTax, you're in luck! This comprehensive guide will walk you through the process of adding your work-from-home expenses, helping you potentially save some significant money.
Are you ready to turn your home office into a tax-saving powerhouse? Let's dive in!
How to Add Work From Home Expenses on TurboTax: A Comprehensive Guide
For most self-employed individuals, deducting work-from-home expenses can lead to substantial tax savings. If you're an employee, the rules changed after the Tax Cuts and Jobs Act (TCJA) of 2017, suspending the deduction for unreimbursed employee business expenses. However, if you're a self-employed individual, a freelancer, or an independent contractor, the home office deduction is still very much alive and well.
Step 1: Determine Your Eligibility – Do You Qualify for the Home Office Deduction?
Before you even think about entering numbers into TurboTax, the absolute first thing you need to do is confirm your eligibility. This is crucial, as the IRS has strict rules for what constitutes a deductible home office.
There are two primary tests you must meet:
Sub-heading: The "Exclusive and Regular Use" Test
Exclusive Use: This means you must use a specific area of your home only for your trade or business. This doesn't necessarily mean a separate room, but it must be a clearly identifiable space used solely for business. For instance, if your kitchen table doubles as your office during the day and your dining table at night, it likely won't qualify. However, a dedicated corner of your living room, consistently used only for work, could qualify.
Regular Use: You must use this space for business on a "regular" basis. Incidental or occasional use won't cut it. You should be consistently conducting business activities in this dedicated area.
Sub-heading: The "Principal Place of Business" Test
Your home office must be either:
Your principal place of business, meaning it's where you conduct the most important and essential functions of your business. This is often the case for freelancers, consultants, or online business owners.
A place where you regularly meet or deal with patients, clients, or customers in the normal course of your business. This implies a physical presence for your clients at your home office.
A separate structure not attached to your home (like a detached garage or studio) used exclusively and regularly for your business.
Important Note: If you are an employee working from home, even if your employer requires it, you generally cannot claim the home office deduction on your federal return. This deduction was suspended for employees from 2018 through 2025 by the Tax Cuts and Jobs Act (TCJA). Always consult a tax professional for specific advice related to your situation, as state laws may vary.
Step 2: Choose Your Deduction Method – Simplified vs. Actual Expenses
Once you've confirmed your eligibility, you have two methods to calculate your home office deduction. TurboTax will guide you through both, but it's good to understand the differences upfront.
Sub-heading: Option A: The Simplified Method (The Easier Path)
This method is exactly what it sounds like – simpler. It involves less record-keeping and calculation.
How it works: You can deduct $5 per square foot of your home used for business, up to a maximum of 300 square feet. This means the maximum deduction you can claim using this method is $1,500 ($5 x 300 sq ft).
Benefits: Less paperwork, no need to calculate depreciation, and generally faster.
Drawbacks: It might result in a smaller deduction than the actual expense method, especially if you have significant qualifying expenses.
Sub-heading: Option B: The Actual Expenses Method (The Detailed Path)
This method requires more meticulous record-keeping but can lead to a larger deduction if your expenses are high.
How it works: You deduct a percentage of your actual home expenses based on the portion of your home used for business. For example, if your home office is 10% of your home's total square footage, you can deduct 10% of eligible home expenses.
Benefits: Potentially higher deduction if your expenses are substantial. Allows for depreciation of the business portion of your home.
Drawbacks: Requires detailed record-keeping of all related expenses, including utility bills, mortgage interest, insurance, and repairs. You'll also need to calculate depreciation, which can be complex.
TurboTax Tip: TurboTax will typically allow you to explore both options and recommend the one that gives you the best deduction.
Step 3: Gather Your Documentation (Especially for Actual Expenses)
Regardless of the method you choose, good record-keeping is paramount. For the actual expenses method, this step becomes even more critical.
Sub-heading: Essential Records for Both Methods
Proof of Business Use: While not explicitly required for submission, it's wise to have photos of your dedicated workspace. This can be invaluable if the IRS ever questions your deduction.
Square Footage: Measure your dedicated home office space and the total square footage of your home. This is essential for both methods (especially for the actual expense percentage calculation).
Sub-heading: Additional Records for Actual Expenses Method
Mortgage Interest: Your Form 1098 from your lender.
Property Taxes: Property tax statements.
Homeowners/Renters Insurance: Insurance bills or statements.
Utilities: Electricity, gas, water, internet, and trash bills for the entire year.
Repairs and Maintenance: Receipts for any repairs or maintenance work done to your home, especially those directly related to your office space.
Home Improvements: Records for any improvements made to your home that benefit the business space.
Depreciation: If you owned your home and used it for business before 2024, you'll need records of your home's basis and any prior depreciation taken. TurboTax will help calculate this for new users.
Step 4: Entering Work-From-Home Expenses in TurboTax (Step-by-Step)
Now that you're prepared, let's navigate TurboTax! The exact steps might vary slightly depending on the TurboTax version you're using (Online, Desktop, Premier, Self-Employed), but the general flow remains consistent.
Sub-heading: Accessing the Home Office Deduction Section
Log in to your TurboTax account or open your desktop software.
Navigate to the "Federal Taxes" tab (or "Personal" if using a different version).
Go to "Deductions & Credits."
Look for the "Self-Employment Expenses" or "Business Expenses" section. If you're self-employed and have already entered your Schedule C income, this will be part of your business setup.
You'll likely see a section for "Home Office Deduction" or "Expenses for Business Use of Your Home." Click "Start" or "Revisit."
Sub-heading: TurboTax Interview Questions
TurboTax will then guide you through a series of interview questions to determine your eligibility and help you choose the best method. Be prepared to answer:
Do you have a home office that you use exclusively and regularly for your business? (Answer "Yes" if you meet the criteria from Step 1).
Is your home office your principal place of business, or do you meet clients there regularly? (Confirm your qualification).
What is the square footage of your dedicated home office space? (Enter the measurement you gathered).
What is the total square footage of your entire home? (This is crucial for the actual expense method percentage).
Do you want to use the simplified method or the actual expenses method? TurboTax may prompt you to try both to see which yields a higher deduction. Often, TurboTax will automatically calculate both and select the more beneficial one for you.
Sub-heading: Entering Your Expenses (If Using Actual Expenses Method)
If you opt for or TurboTax recommends the actual expenses method, you'll be prompted to enter your home expenses.
Direct Expenses: These are expenses solely for your home office. Enter the full amount for these. Examples include:
Dedicated business phone line
Repairs specific to your office space (e.g., painting your office, fixing a light fixture in your office)
Office furniture (you might depreciate this separately, TurboTax will guide you)
Indirect Expenses: These are expenses for your entire home, and TurboTax will prorate them based on your home office's business-use percentage. Do NOT pre-prorate these yourself. Enter the total amounts. Examples include:
Rent: If you rent your home, enter your total annual rent payments.
Mortgage Interest: Enter the total mortgage interest from your Form 1098.
Property Taxes: Enter the total property taxes paid.
Homeowners/Renters Insurance: Enter the total annual premiums.
Utilities: Enter the total amounts for electricity, gas, water, and internet.
General Home Repairs: Enter amounts for repairs that benefit the entire home (e.g., roof repair, furnace repair). TurboTax will apply the business-use percentage.
Depreciation: TurboTax will guide you through calculating depreciation for the business portion of your home's structure. This involves knowing the adjusted basis of your home (cost plus improvements, minus land value) and the date you started using it for business.
Sub-heading: Reviewing Your Deduction
TurboTax will calculate your home office deduction and integrate it into your Schedule C (Profit or Loss from Business). It will typically be reported on IRS Form 8829, Expenses for Business Use of Your Home.
Important Consideration: The home office deduction cannot create or increase a loss for your business. If your home office expenses exceed your net business income, the excess can often be carried forward to future tax years. TurboTax handles this automatically.
Step 5: Final Review and Filing
Before you file, always take the time to:
Review all your entries in TurboTax, especially the home office section, to ensure accuracy.
Check for any red flags or warnings from TurboTax's error checker.
Save or print copies of your tax return and all supporting documentation for your records. The IRS recommends keeping records for at least three years from the date you file your return.
10 Related FAQ Questions
Here are some frequently asked questions about work-from-home expenses on TurboTax:
How to calculate the business-use percentage of my home?
You can calculate it by dividing the square footage of your dedicated home office space by the total square footage of your entire home. For example, if your office is 100 sq ft and your home is 1000 sq ft, your business-use percentage is 10%.
How to qualify for the home office deduction if I'm an employee?
Generally, employees cannot claim the home office deduction on their federal tax return from 2018 through 2025 due to changes from the Tax Cuts and Jobs Act. This deduction is primarily for self-employed individuals.
How to handle common home expenses like internet and utilities?
If you're using the actual expenses method, you'll enter the total annual amount for these utilities. TurboTax will then apply your calculated business-use percentage to these totals to determine the deductible portion.
How to deduct office supplies and equipment used at home?
Office supplies (pens, paper, printer ink) are generally 100% deductible as direct business expenses. For larger equipment like computers, printers, or office furniture, you can often deduct their full cost in the year of purchase using Section 179 or special depreciation allowance rules, or depreciate them over several years. TurboTax will guide you on the best method.
How to claim depreciation on my home office?
If you own your home and use the actual expenses method, TurboTax will calculate depreciation for the business portion of your home's structure. You'll need the original cost of your home (excluding land value) and the date it was placed in service for business use.
How to account for changes in my home office space during the year?
If your home office space changed (e.g., you expanded it) or you only used it for part of the year, TurboTax will prompt you for these details. You'll likely need to calculate expenses for the periods when the space was used and prorate accordingly.
How to carry forward unused home office deductions?
If your home office deduction is limited because it would create or increase a business loss, TurboTax will automatically calculate the carryover amount and record it for you to use in future profitable years.
How to know if the simplified method or actual expense method is better for me?
TurboTax often performs both calculations in the background and recommends the method that results in the largest allowable deduction for you. Generally, if your actual prorated expenses are high, the actual expense method will yield a larger deduction.
How to prove my home office is exclusively used for business if audited?
Keep detailed records, including photos of your dedicated workspace, a log of business activities performed there, and all receipts for expenses. Clearly delineate the business area from personal living space.
How to get help from a TurboTax expert if I'm unsure?
TurboTax offers options like TurboTax Live, where you can connect with a tax expert (CPA or EA) who can review your return, answer questions, and even file for you. Look for the "Live" or "Ask a Tax Expert" options within the software.