Yes, if you work from home in North Carolina and meet IRS guidelines, you may qualify for the home office deduction in 2025. Your space must be used regularly and exclusively for business—and it must be your principal place of business. Different rules apply for sole proprietors, S Corps, and employees.
Can You Deduct a Home Office in North Carolina?
If you’re running a business, freelancing, or working remotely in 2025, you may be wondering if you can write off part of your home as a tax deduction.
Here’s the short answer: Yes—but only if you meet strict IRS requirements. And the rules differ depending on your entity type and employment status.
🔹 Who Can Claim the Home Office Deduction?
✅ Sole Proprietors & Single-Member LLCs:
Can claim it directly on Schedule C of their tax return.
✅ S Corporation Owners:
Must be reimbursed through an Accountable Plan (more on that below).
🚫 W-2 Employees:
Since the 2018 Tax Cuts and Jobs Act, most employees cannot claim a home office deduction—even if you work remotely.
🔹 What Qualifies as a “Home Office”?
To claim the deduction, your space must meet both of the following:
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Regular and Exclusive Use
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You must use the space only for business—no kitchen table or guest rooms.
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Principal Place of Business
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It must be the main location where you do your work (meet clients, manage the business, etc.).
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Even a dedicated corner of a room can qualify—if it’s clearly separated and only used for work.
🔹 Two Methods for Claiming the Deduction
| Method | Description |
|---|---|
| Simplified | $5 per square foot (up to 300 sq ft max) |
| Actual Expense | Deduct actual costs: mortgage interest, utilities, property taxes, repairs |
If you’re unsure which is better, we can run both during your tax projection and compare the savings.
📌 Read why proactive tax planning is critical in 2025 »
🔹 Special Rules for S Corporations
S Corp owners cannot take a home office deduction on their personal return. Instead, you must:
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Create an Accountable Plan
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Submit monthly or quarterly reimbursement requests to the business
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Have the S Corp reimburse you for eligible expenses
This setup is 100% legitimate—but only if the paperwork and calculations are done right.
📌 Explore our S Corporation tax planning guide »
🔹 What Can You Deduct?
If you qualify, these expenses may be deductible:
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Rent or mortgage interest (portion related to home office)
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Utilities
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Homeowner’s insurance
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Repairs and maintenance
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Property taxes
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Depreciation (if using actual expense method)
Keep detailed records—receipts, floorplans, and utility breakdowns help defend your claim if the IRS asks.
📌 See how strong bookkeeping protects your deductions »
Final Thoughts
The home office deduction can provide real savings—but only when it’s done by the book. Don’t guess. Don’t rely on tax software alone. The IRS is increasingly focused on these deductions, especially when claimed incorrectly by S Corps or employees.
At Polaris, we help small businesses and solopreneurs across North Carolina stay compliant, audit-proof, and tax-efficient.
📅 Schedule your consultation today and let’s make sure your home office deduction is solid, not a red flag.