Deducting Repairs to Your Home Office

If you have an office in your home that qualifies for the home office deduction, you'll be able to deduct a variety of home expenses. These include not only a portion of your rent or mortgage payments and utilities but some home repairs as well.

The ability to deduct repair costs is particularly valuable, because they ordinarily aren't deductible at all for a homeowner.

Who Qualifies for the Home Office Deduction?

You can take the home office deduction if you:

• are in business
• use your home office exclusively for business (unless you store inventory or run a daycare center in your home), and
• use your home office for business on a regular basis.

Everyone must meet these three threshold requirements to qualify. If you meet these qualifications, then you must also meet any one of the following requirements:

• Your home office is your principal place of business.
• You regularly and exclusively use your home office for administrative or management activities for your business and
• have no other fixed location where you perform such activities.
• You meet clients or customers at home.
• You use a separate structure on your property exclusively for business purposes.
• You store inventory or product samples at home.
• You run a daycare center at home.

These rules apply if you are a sole proprietor, a partner in a partnership, a limited liability company (LLC) owner, or an S corporation owner. If you're one of the few home businesspeople who has formed a regular C corporation that you own and operate, and you work as its employee, however, you must meet some additional requirements.

Can Employees Qualify for the Home Office Deduction?

Before 2018, employees could claim a home office deduction if they satisfied the requirements and had the home office for the convenience of the employer. If they qualified, they could claim the home office deduction as a personal miscellaneous itemized deduction on Schedule A.

However, the Tax Cuts and Jobs Act eliminated this deduction for employees starting in 2018 and lasting through 2025. (If you work as an employee, ask your employer to reimburse you for your home office expenses.)

Can You Deduct a Repair as Part of Your Home Office Deduction?

If you qualify for the home office deduction, you need to answer two questions to know whether and how to deduct a repair as part of that deduction:

• Is the expense a repair or an improvement?
• If it's a repair, is it a direct or indirect expense?

Is It a Repair or an Improvement?

The cost of repairs to business property is a currently deductible business expense—that is, you can deduct the entire amount in a single year. On the other hand, if an expense constitutes an improvement to your home instead of a repair, the cost will have to be depreciated over many years.

Determining whether an expense is a repair or an improvement can be difficult. However, the basic rule is that you must depreciate an expense you incur to:

• make a long-term asset much better than it was before
• restore it to operating condition, or
• adapt it to a new use.

Expenses you incur that don't result in a betterment, restoration, or adaptation are currently deductible repairs. For example, replacing the entire roof of your home is an improvement. Replacing a few roof shingles with new shingles of equal quality is a repair. Similarly, replacing the wall-to-wall carpet in your office is an improvement. Fixing a hole in your existing carpet is a repair.

Is It a Direct or an Indirect Expense?

The IRS divides home office expenses into two categories: direct expenses, which benefit only your home office, and indirect expenses, which benefit both your office and your home.

Direct Expenses

You have a direct home office expense when you pay for something just for the home office portion of your home. The entire amount of a direct home office expense is deductible.

Example. Jenn pays a handyman $200 to fix the window in her home office that won't close properly. She may deduct this entire amount as part of her home office deduction.

Indirect Expenses

An indirect expense is a payment for something that benefits your entire home, including both the home office portion and your personal space. You may deduct only a portion of this expense—the home office percentage of the total.

Example. Jenn pays $1,000 to repair the roof on her home. This is an indirect expense because it benefits her entire home. She may deduct her home office percentage of the expense. She uses 15% of her home as an office, so she may deduct 15% of the cost, or $150.

You can deduct the home office percentage of home maintenance expenses that benefit your entire home, such as housecleaning of your entire house, roof and furnace repairs, and exterior painting. These costs are deductible whether you hire someone or do them yourself. If you do the work yourself, however, you can only deduct the cost of materials, not the cost of your own labor. Termite inspection, pest extermination fees, and snow removal costs are also deductible.

Home maintenance costs that don't benefit your home office—for example, painting your kitchen—aren't deductible.

Getting Help With Your Tax Issues

For more information, see the IRS publication on Tangible property regulations – Frequently asked questions.

For more information on deductions and other tax issues for small businesses, get Deduct It! Lower Your Small Business Taxes, by Stephen Fishman (Nolo).

If you have questions about the home office deduction or any other deductions, talk to a tax professional, such as a certified public accountant or a tax attorney.