Accountable Plan: Reimbursing a Home Office and Internet

By Daniel Hiltzik, CPA · Updated September 21, 2026

At a glance

Reimbursing yourself through an accountable plan is now the only route, and permanently so. The 2025 legislation removed the sunset on the suspension of employee business expense deductions, so there is no year in which you get to deduct these costs yourself again.
The citation moved. What everyone still cites as section 67(g) is now section 67(h), and the new 67(g) is about educator expenses. A page still saying the suspension runs through 2025 is out of date.
Three conditions decide whether a reimbursement is wages: a business connection, substantiation, and the return of anything paid in excess. Miss one and the whole arrangement fails.
Renting your home office to your own corporation does not work. Section 280A(c)(6) shuts that off specifically for an employee renting to an employer.

An owner who works through a corporation — an S corporation, in almost every case that reaches this page — cannot simply deduct the home office, the internet line or the mileage on a personal return. That route closed in 2018 and, since the 2025 legislation, it is closed for good. What remains is the accountable plan: the company reimburses the cost, deducts it, and the payment is not wages to you. It is a small piece of paperwork with a large arithmetic difference attached.

The rule most articles on this subject still describe expired in December 2025. It did not expire. The suspension was made permanent, and in the process it was moved to a different subsection, which is why the citation you will see quoted no longer says what people think it says.

What actually changed, and where the citation went

Section 67 disallows miscellaneous itemized deductions, the category that used to hold unreimbursed employee business expenses. As enacted in 2017 the disallowance ran for taxable years beginning after December 31, 2017 and before January 1, 2026. Section 70110 of the 2025 Act, headed “termination of miscellaneous itemized deductions other than educator expenses,” struck that end date and redesignated the provision. The operative text now reads, at section 67(h):

“Notwithstanding subsection (a), no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 31, 2017.”

No end date. Meanwhile the letter (g) was reused for a new definition of educator expenses, so a reference to “section 67(g)” now points at something else entirely. The practical consequence for a shareholder-employee is simple and permanent: the cost either gets reimbursed by the company or it is not deducted by anyone.

What this looks like on an actual return

If you read nothing else, read this. Same $6,000, same costs, two sets of paperwork.

An S corporation reimburses its owner $6,000 during the year for a home office and a business internet line. The owner’s wages are below the Social Security wage base, so the full 7.65% applies on each side, and the owner’s marginal rate is 24%.

The same $6,000	Accountable plan	No plan, or paperwork missing
Company’s deduction	$6,000	$6,459
Added to the owner’s W-2	—	$6,000
Social Security and Medicare withheld from the owner	—	$459
Social Security and Medicare the company pays on top	—	$459
Income tax on it at 24%	—	$1,440
What the owner keeps of the $6,000	$6,000	$4,101

The same money, and $1,899 less of it reaches the owner. Add the $459 the company pays in employer payroll tax and the total cost of getting the arrangement wrong is $2,358 on $6,000, every year it is wrong. The company’s deduction is slightly larger in the second column, which is the detail that makes a nonaccountable arrangement look harmless in the books while it is expensive on the W-2.

The one-line version. An accountable plan does not create a deduction. It moves an existing one from a place you can no longer use to a place you can, and keeps the payment off your W-2 while it does. Figures are illustrative and rounded.

The three conditions

An arrangement is an accountable plan if it meets all three requirements in Reg. section 1.62-2. They are not a formality, and failing one fails the arrangement rather than the item.

Business connection. The arrangement pays advances, allowances or reimbursements only for deductible business expenses incurred in performing services as an employee. A round monthly sum paid whether or not anything was spent is not a business connection, which is what makes most informal owner arrangements fail before they reach the other two tests.

Substantiation. Each expense has to be substantiated to the payor within a reasonable period. That means the amount, the date, the place and the business purpose, supported by the record the item requires. The company is the payor — a small point that decides where the paperwork lives — so the receipts belong in the company’s file rather than in a drawer at home.

Return of excess. Anything advanced beyond what is substantiated has to be returned within a reasonable period. An arrangement that lets the employee keep the difference is not accountable, however well documented the rest of it is.

“Reasonable period” has a safe harbor. Under the fixed date method in paragraph (g)(2), an expense substantiated within 60 days of being paid or incurred, and an excess returned within 120 days, are treated as within a reasonable time. Miss the conditions and paragraph (c)(3) applies: every amount paid under the arrangement is treated as paid under a nonaccountable plan, included in wages and subject to withholding.

The home office, and the rental idea that does not work

For a shareholder-employee, the home office has to clear section 280A(c)(1): exclusive and regular use as the principal place of business, and, because you are an employee of your corporation, exclusive use “for the convenience of his employer.” A room used for the business on weekdays and for the family at weekends is not exclusive, and no plan document repairs that.

The idea that circulates as an alternative is to have the corporation pay you rent for the space. It does not work, and the reason is specific — a provision written for exactly this arrangement — rather than a general anti-abuse argument. Section 280A(c)(6) says the business-use exception “shall not apply to any item which is attributable to the rental of the dwelling unit (or any portion thereof) by the taxpayer to his employer during any period in which the taxpayer uses the dwelling unit (or portion) in performing services as an employee.” The rent is income to you and the allocable costs are not deductible against it. Reimbursement through an accountable plan is the route that survives, which is the whole reason it matters here.

The internet line

There is no special rule for home internet, and that is the point. It is an ordinary business expense to the extent of business use, and a mixed personal and business line has to be allocated on a reasonable basis that you can explain. A percentage of the monthly bill, supported by how the connection is actually used, reimbursed under the plan, is deductible by the company and is not wages to you. A flat “internet allowance” of a round figure each month, paid without substantiation, is wages, and it is the item most often found on a W-2 audit of a small corporation because it recurs twelve times a year.

What to do about it

Adopt the plan before the first reimbursement, not at year end. The regulation has no written-document requirement, but an arrangement adopted by the board in advance is the only version that can be shown to have existed when the payments were made.
Put the expense report on a monthly cycle. Amount, date, place, business purpose, receipt. A monthly rhythm sits comfortably inside the 60-day safe harbor and stops the year-end reconstruction that makes substantiation look invented.
Pay it as a separate transfer, labeled. A reimbursement mixed into the payroll run or taken as an owner draw is hard to characterize afterwards, and characterization is the whole question.
Measure the home office once and keep the measurement. Square footage, the share of the home, and what the room is used for. Then confirm the exclusivity is real rather than intended.
Set the internet allocation deliberately. Write down the basis for the percentage. A figure you can explain is a defensible figure; a round number with no method behind it is not.

Frequently asked questions

Can an S corporation shareholder-employee be reimbursed for a home office?

Yes, and for most owners it is the only way the cost gets deducted at all. The corporation reimburses the allocable share of mortgage interest or rent, utilities, insurance and repairs under an accountable plan, deducts the payment, and it is not wages to you. The space still has to meet section 280A(c)(1): exclusive and regular use as the principal place of business, and for an employee, exclusive use for the convenience of the employer.

Does an accountable plan have to be in writing?

The regulation does not require a written document. It requires an arrangement that meets three conditions, which is a different thing. In practice a short written plan adopted by the board is what lets you show the arrangement existed before the payments rather than after a notice, and it costs nothing to have. Treat writing it as evidence rather than as compliance.

Is reimbursed home internet taxable to me?

Not if it is reimbursed under an accountable plan for the business-use portion and substantiated. A mixed line has to be allocated on a basis you can explain, and the substantiation goes to the company within a reasonable period. A flat monthly internet allowance paid without substantiation fails the business connection test, and under paragraph (c)(3) of the regulation the entire amount is wages subject to withholding.

Can I just rent my home office to my corporation instead?

No. Section 280A(c)(6) removes the business-use exception for any item attributable to renting the dwelling to your employer while you use it performing services as an employee. The rent is income to you and the costs allocable to it are not deductible against it, which is the opposite of the result people expect from the arrangement. Accountable plan reimbursement is the route that works.

What happens if the reimbursements are found to be nonaccountable?

Every amount paid under the arrangement becomes wages, not merely the items that were poorly documented. The corporation owes the employer share of Social Security and Medicare, the employee share it should have withheld, and the amounts go on a corrected W-2, with interest and penalties on top. On $6,000 a year that is about $2,358 of tax and payroll tax, repeated for each open year.

I am a sole proprietor, not a corporation. Does this apply to me?

No, and you do not need it. A sole proprietor deducts the home office and the business share of the internet directly on Schedule C, because those are trade or business expenses rather than employee expenses. The accountable plan question arises only where there is an employer paying an employee, which for most readers means an S corporation and its owner.

Can the plan reimburse me for prior years?

Reimbursing a cost incurred in an earlier year is difficult to place inside the substantiation and return-of-excess timing the regulation describes, and the safe harbor plainly does not cover it. The honest answer is that the deduction for those years is generally lost, which is the cost of not having had the arrangement. Put the plan in place now and make the current year work properly.

Talk to us about the arrangement

An accountable plan is a short document and a monthly habit, and it is worth having in place before the first reimbursement rather than after a notice. The firm sets these up as part of the work on S corporation owners.

Sources. The disallowance of miscellaneous itemized deductions is section 67(h), formerly 67(g), as amended by section 70110 of Public Law 119-21, which struck the January 1, 2026 end date and redesignated the subsection. The accountable plan conditions, the nonaccountable consequence and the 60 and 120 day safe harbor are Reg. section 1.62-2, paragraphs (c)(1), (c)(3), (d)(1), (e)(1), (f)(1) and (g)(2). The home office conditions and the rule on renting to an employer are section 280A(c)(1) and (c)(6). Social Security and Medicare rates are section 3101(a) and (b). This article is general information about 2026 and is not advice for your situation. Figures in the illustration are rounded and assume wages below the Social Security wage base.