Can You Write Off an Apartment for Work Expenses?

Many people working from home wonder if they can deduct part of their apartment expenses as a business expense. The answer depends on specific tax rules that determine whether your living space qualifies. Misunderstanding these rules can lead to missed deductions or issues with the IRS.

Tax laws require a clear distinction between personal and business use, making it essential to understand what qualifies before claiming deductions.

Qualifying for a Dedicated Work Space

To deduct part of your apartment as a business expense, the IRS requires the space be used exclusively and regularly for work. A designated area that serves no personal function is necessary—using a corner of your living room for both work and leisure wouldn’t qualify. A home office must be a separate room or a clearly defined section used solely for business activities.

The space must be used consistently for work, not just occasionally. If you work from home only a few times a month, the IRS may not consider it a legitimate home office. The space should be the primary location where you conduct business, whether that involves meeting clients, handling administrative tasks, or performing remote work.

For self-employed individuals, the home office deduction is claimed on Schedule C (Form 1040). Employees face stricter rules. Since the Tax Cuts and Jobs Act of 2017 eliminated unreimbursed employee expenses for W-2 workers through 2025, most employees cannot deduct home office costs unless they operate a side business.

Distinguishing Personal and Business Use

The IRS enforces strict guidelines to ensure only legitimate business expenses are deducted. Simply working from home doesn’t automatically qualify—you must clearly separate business and personal use.

One way to establish this separation is by limiting business activities to a specific section of your apartment. If you use a spare bedroom exclusively for work, it’s easier to justify the deduction. But if you work from your kitchen table during the day and use the same space for meals in the evening, the IRS would likely disqualify it. A dedicated desk in an area not repurposed for non-business activities strengthens your claim.

Beyond physical separation, financial records should also reflect this distinction. Business-related purchases, such as office furniture or supplies, should be paid for using a separate account or credit card whenever possible. This simplifies record-keeping and demonstrates to the IRS that these expenses are directly tied to your work. If audited, having well-documented transactions makes it easier to substantiate your claims.

Apportioning Costs for Rent and Utilities

Determining how much of your rent and utilities can be deducted requires a reasonable allocation method that reflects the portion of your apartment used for business. The most common approach is based on square footage—dividing the area used exclusively for work by the total living space. If your apartment is 800 square feet and your home office occupies 160 square feet, you can allocate 20% of your rent and utilities as business expenses. The IRS generally accepts this method if calculations are reasonable and well-documented.

An alternative approach may be necessary if your work area isn’t fixed but consists of multiple rooms used at different times. The time-based method estimates the percentage of time each space is used for work and applies that percentage to the overall cost. While less common, this method may be useful for those with irregular workspaces, such as photographers who set up temporary studios. However, it requires detailed tracking to justify the deduction.

Certain expenses may also be allocated differently. Fixed costs like rent and renters insurance are typically divided using the same percentage as the home office space calculation. Variable expenses, such as electricity, heating, and internet, may require a more nuanced approach, especially if business activities significantly increase usage. If running a home-based business requires additional lighting, computer equipment, or high-speed internet, a higher percentage of these costs may be justifiable. Tracking utility bills before and after establishing a home office can help demonstrate increased consumption tied to business activities.

Documenting and Tracking Expenses

Maintaining thorough records is necessary for substantiating any deductions claimed for business use of an apartment. The IRS requires clear and accurate documentation, which means retaining invoices, receipts, and bank statements related to business operations. Digital tools such as QuickBooks, FreshBooks, or Wave can streamline this process by categorizing transactions and generating reports. Using a dedicated business account or credit card further simplifies record-keeping by keeping personal and business expenses separate.

Beyond financial transactions, maintaining a log of how the workspace is used can provide additional support in the event of an audit. This may include keeping a calendar that notes work hours, client meetings, or business activities conducted from the home office. For those who share an apartment with roommates or family members, timestamped photos showing a consistent office setup can help demonstrate exclusive business use.

Possible Tax Implications

Claiming a home office deduction can reduce taxable income, but it also comes with tax considerations. The method used to calculate the deduction—either the simplified option or the actual expense method—affects the overall tax impact. The simplified method allows a deduction of $5 per square foot of office space, up to a maximum of 300 square feet, making it easier to calculate but potentially limiting the deduction amount. The actual expense method, which involves apportioning rent, utilities, and other costs, often results in a larger deduction but requires detailed record-keeping.

For self-employed individuals, a home office deduction directly lowers taxable income on Schedule C, reducing both income tax and self-employment tax. However, for those who own their apartment, deducting a portion of mortgage interest and depreciation may lead to capital gains tax implications when selling the property. The IRS may recapture depreciation deductions, meaning a portion of the gain on sale could be taxed at a higher rate. Proper tax planning can help mitigate these effects, ensuring that deductions claimed now don’t lead to unexpected liabilities in the future.