If you work from home, the home office deduction is likely the most valuable tax benefit available to you. However, the rules differ significantly depending on whether you're a W-2 employee or self-employed / contractor.
You can deduct the business-use portion of your home. There are two methods:
| Method | How It Works | Best For |
|---|---|---|
| Simplified Method | $5 per sq ft of office, up to 300 sq ft = max $1,500/yr | Small office, easy math |
| Regular Method | % of home used for business × all home expenses (rent, utilities, insurance) | Larger office, higher expenses |
The regular method typically yields a larger deduction. For example, if your home office is 15% of your home's total square footage and you spend $24,000/year on rent + utilities, you can deduct $3,600.
Beyond the home office itself, there's a stack of related expenses that self-employed remote workers can write off:
| Expense | Deductible Amount | Notes |
|---|---|---|
| Internet Service | Business-use % (often 50–80%) | Document business vs personal split |
| Laptop / Computer | 100% if exclusively for work; prorated if shared | Can Section 179 expense in year of purchase |
| Phone Bill | Business-use % (typically 50%) | Prorate personal vs business use |
| Office Furniture & Equipment | 100% if used for business | Desk, chair, monitor, keyboard, webcam |
| Coworking Space | 100% | Keep all receipts; monthly memberships fully deductible |
| Software Subscriptions | 100% if business-related | Notion, Figma, GitHub, Slack, etc. |
| Professional Development | 100% | Courses, books, conferences directly related to work |
| Health Insurance Premiums | 100% (self-employed) | Above-the-line deduction, reduces AGI |
| Self-Employment Tax | 50% deductible | Partially offsets the SE tax burden |
If you live in one US state but your employer is in another, you may owe taxes in both states. This is one of the most misunderstood areas of remote work taxes.
Most states tax income earned within their borders. If you work remotely from State A for a company headquartered in State B, you generally owe income tax to State A (where you live and work). State B may also try to tax you — especially if you occasionally travel there for meetings.
If you work remotely while living outside the US (as a US citizen), the rules get more complex but also more favorable.
US citizens living abroad can exclude up to $126,500 (2024) of foreign-earned income from US federal taxes using the FEIE — but this only applies if you meet either the Physical Presence Test (330 days outside the US in a 12-month period) or the Bona Fide Residence Test (established residency in a foreign country).
Most countries establish tax residency if you spend more than 183 days there in a tax year. Once you're a tax resident, you'll generally owe local income tax on your worldwide income. Some countries — like Portugal (NHR program), Georgia (Virtual Zone), and Paraguay — offer highly favorable rates for remote workers.
Use this before filing to make sure you've captured everything:
No. You can only deduct the portion of your home used exclusively for business. If your office takes up 150 sq ft of a 1,000 sq ft apartment, you can deduct 15% of your rent — not all of it.
Generally yes — employer stipends are considered taxable income unless they're part of an accountable plan (where you submit receipts and return unused funds). Many remote companies pay stipends as taxable income for simplicity. Keep your receipts so you can potentially offset this on your own return if self-employed.
File a return in your home state claiming a credit for taxes paid to the other state. You shouldn't pay double taxes — but you may owe the difference if your state's rate is higher. Notify your HR/payroll team in writing that you work remotely from a different state.
Yes, if you expect to owe more than $1,000 in federal taxes for the year. The deadlines are typically April 15, June 15, September 15, and January 15. Missing these results in an underpayment penalty. Use IRS Form 1040-ES to calculate and pay.