By Gruv Editorial Team
You’ve mastered the art of working from anywhere. One month it’s a sun-drenched apartment in Lisbon, the next a cozy cabin in the mountains. You’re living the dream. But as you sip your morning coffee and look out at a view you could have only imagined a few years ago, a nagging question pops into your head: Can any of this actually count as a "home office" on my U.S. tax return? The whole point of this life is freedom, but navigating the IRS rulebook can feel like the exact opposite.
So, let’s get right to it. Can you, as a digital nomad, claim the home office deduction?
Yes, you absolutely can. But—and this is a big but—it’s not a simple checkbox on a form. The IRS has strict, non-negotiable rules about what qualifies, and frankly, they weren't written with our lifestyle in mind. Getting this wrong can land you in a world of hurt. Think of this guide as your map through that tricky territory. We’ll walk through the critical tests you must pass, how to actually calculate the thing, and maybe most importantly, whether it's even the best tax strategy for you.
Here’s what you need to know from the get-go:
Remember that time you took a work call from the couch, then immediately switched to watching Netflix? Or when you answered emails at the kitchen table before clearing it for dinner? To the IRS, those moments are exactly why your entire apartment doesn't count as a home office.
Look, this is the big one. The one rule that separates a legitimate deduction from a major audit headache. It’s called the exclusive and regular use test, and it’s not a suggestion; it’s a bright, uncrossable line.
Think of it like this: you have to create a "business-only bubble" inside your rental. This bubble can be an entire room, or it can simply be a desk and chair tucked into a corner. But whatever is inside that bubble must be used only for your business. The moment your personal life pops that bubble—whether it's using the desk for online shopping or letting the space double as a guest area—the deduction is off the table. It’s that black and white.
This isn't about having a fancy setup. It’s about dedication. The IRS needs to see that you’ve carved out a specific piece of real estate, no matter how small, that is sacrosanct to your work. No exceptions.
Here’s what you absolutely must prove:
You might be paying rent in Thailand, sipping a Chang beer after a long day of work. But here’s the kicker: if your clients, your professional network, and the bank account your invoices are paid into are all back in Chicago, the IRS has a very different idea of where you "live." They don't care about the view from your balcony. They care about where your business is anchored.
This is where the idea of a tax home comes in, and frankly, it’s one of the most misunderstood concepts for freelancers on the move. It’s not about where you sleep. It’s about your business’s economic center of gravity. It’s your principal place of business, regardless of where you lay your head at night.
Now, here's the trap. If you don't have a main place of business—if you're genuinely floating from country to country with no single economic anchor—the IRS might label you an itinerant. It sounds cool, like a wandering hero, but for tax purposes, it's a disaster. Being an itinerant means your "home" is wherever you happen to be at that moment. And if your home is everywhere, you can't be "away from home" on business.
See the problem? Your travel expenses, your lodging costs... they suddenly become non-deductible personal expenses. Poof. Gone.
This is why figuring out your tax home is step zero. You can't even begin to think about claiming a home office deduction on your Airbnb in Lisbon until you’ve established that your tax home is, say, in the U.S. where your business is registered and your primary clients are.
Let’s boil it down:
Alright, so you’ve cleared the big hurdles. You’ve carved out a dedicated, exclusive workspace in your rental, and you’ve figured out your tax home status. Deep breath. Now comes the part where you actually turn that space into a number on your tax form.
Think of it like ordering at a restaurant. You have two menus in front of you. One is a simple, prix-fixe option—predictable and easy. The other is à la carte, where you pick and choose every item, which requires more effort but might get you exactly what you want for a better price. That's the choice you have right now.
First up is the Simplified Method. This is the prix-fixe menu. The math is straightforward: you get to deduct $5 for every square foot of your dedicated office space. That's it. The IRS caps this at 300 square feet, so your maximum possible deduction here is $1,500. There are no receipts for rent or electricity to track. No complicated percentages. It's clean, simple, and low-risk. For many of us who are hopping between locations, this is often the most sane choice.
Then there’s the Actual Expense Method. This is your à la carte option. It’s more work, no question, but the potential payoff can be much bigger. Here’s how it works: you calculate the exact percentage of your home that your office occupies. For example, if your apartment is 800 square feet and your dedicated work corner is 80 square feet, your business use is 10%. You then apply that 10% to all your eligible home-related expenses—your rent, your electricity bill, your internet bill. You add it all up, and that’s your deduction. It demands you become a world-class record-keeper, but if you’re in a high-rent city, that 10% can add up to way more than the $1,500 simplified cap.
So, which path do you take? It comes down to a classic trade-off: your time versus your potential tax savings.
Look, it's easy to get tunnel vision on the home office deduction. We obsess over square footage and "exclusive use" rules, thinking we're being savvy. But what if, by chasing a few hundred dollars, you’re walking right past thousands?
The truth is, the home office deduction is just one small tool in your kit. For most nomads, there are other deductions that are not only bigger but also infinitely simpler to claim.
Let’s start with the obvious one: that coworking space you joined in Lisbon. That monthly membership fee? It’s not some complicated, prorated, “is-my-desk-exclusive-enough” headache. It’s a direct business expense. Clean. Simple. 100% deductible. There’s no test to pass, no photos to take. You paid for a place to work, and you can deduct the cost. Full stop.
And that’s just the beginning. Think about the operational costs of your business—the stuff you pay for every month without a second thought.
These aren’t personal splurges; they are the cost of doing business. And they are all deductible.
But honestly, all of that can feel like pocket change compared to the real heavyweight champion for U.S. nomads: the Foreign Earned Income Exclusion (FEIE).
Think of the home office deduction as a handy little screwdriver. The FEIE is a hydraulic press. If you meet the qualifications (like being outside the U.S. for at least 330 full days in a 12-month period), this single provision can change your entire financial picture. For 2023, it allows you to exclude over $120,000 of your income from U.S. federal income tax.
Let that sink in. This isn’t about shaving a few bucks off for your share of the rent. This is about potentially paying zero U.S. income tax on a six-figure income. It's a different league entirely, and for any American nomad spending significant time abroad, it should be your absolute first priority to understand. Chasing the home office deduction before you've sorted out your FEIE strategy is like meticulously polishing the hubcaps on a car that might not even need an engine.
You're now armed with the knowledge to make an informed decision. So, is the home office deduction right for you? After all that IRS-speak, it really boils down to one word: diligence.
Look, this is where you need to have a really honest conversation with yourself, freelancer to freelancer. Are you the type of person who thrives on meticulous organization? Do you already have a color-coded spreadsheet for your receipts and a dedicated corner of your apartment that is a sacred, work-only zone? If that’s you, then yes, the home office deduction is absolutely an achievable tax benefit. Go for it.
But for many of us—and there’s zero shame in this—life on the road is a little more chaotic. If the thought of calculating the square footage of three different Airbnbs and prorating six months of Portuguese utility bills makes you want to close your laptop for good, then this deduction probably isn't your best play. Your energy is far better spent focusing on the clearer, often more powerful, deductions. Things like your coworking space fees, that new laptop, and especially the mighty Foreign Earned Income Exclusion (FEIE) are safer, smarter strategies.
Your best move isn't about chasing every last dollar. It's about being brutally honest about your work habits and choosing the path that gives you the most benefit for the least amount of stress.
Here’s what to do next:
Yes, you absolutely can. But here’s the critical part: you still have to pass the IRS’s strict “exclusive and regular use” test. This means that even in a temporary rental, you need a spot that is 100% dedicated to your business.
Think of it this way. That corner desk where you only do client work? That qualifies. The kitchen table where you answer emails in the morning and eat dinner at night? That doesn't. You need to be able to point to a specific area and honestly say, "For the entire month I was here, that space was only for my business." No exceptions.
Theoretically, yes. In reality, it’s a logistical nightmare. Imagine doing the paperwork not just once, but twelve times. You would need to prove exclusive use in each and every location and then calculate the deduction separately for the specific time you were in each one.
Honestly, you have to ask yourself if it’s worth the headache. The amount of record-keeping required is immense, and your time might be better spent focusing on your business or on bigger tax wins.
Documentation is everything. It’s your shield, your proof, the story you tell the IRS about your business. If you ever face scrutiny, your word means nothing without records to back it up. So, get in the habit of being your own meticulous archivist.
Let’s be direct: it can put a spotlight on your tax return. It’s not a red flag that screams "I'm cheating!" but it's one that says, "Hey, maybe look a little closer here." Why? Because it’s historically been a deduction that people get wrong or try to abuse.
This isn’t a reason to be scared of it. It’s a reason to be flawless in your execution. When you have iron-clad proof—the photos, the receipts, the accurate calculations—you're not afraid of a closer look. You’re prepared for it.
No, you have to pick one. The IRS needs to know your principal place of business, and you can only have one of those. Think of it as your business’s official headquarters.
If you spend most of your core working hours and do your most important business activities at a coworking space, then that is your principal place of business. The great news is that the entire cost of that membership is a straightforward, 100% deductible business expense. You can’t then also claim a home office, because your “work home” is the coworking space.