Home Office Deduction
A deduction for the business use of your home, available to self-employed individuals. You can use the simplified method ($5 per square foot, up to 300 sq ft) or the regular method based on actual expenses.
The home office deduction allows self-employed individuals to deduct expenses for the portion of their home used regularly and exclusively for business. The space must be your principal place of business or a place where you regularly meet clients. W-2 employees cannot claim this deduction under current federal law.
There are two methods for calculating the deduction. The simplified method gives you $5 per square foot of dedicated office space, up to a maximum of 300 square feet ($1,500 max deduction). The regular method calculates the actual expenses — including mortgage interest or rent, utilities, insurance, repairs, and depreciation — based on the percentage of your home used for business.
The regular method can yield a larger deduction, especially for expensive homes or large office spaces, but requires detailed record-keeping. The simplified method is easier and avoids depreciation recapture when you sell your home. You can switch between methods from year to year to use whichever provides the greater benefit.
How it works
The home office deduction lets self-employed people write off part of their housing costs, but only for space used regularly and exclusively for business — a spare room used as an office qualifies, while a kitchen table used for both dinner and invoicing does not meet the exclusive-use test. W-2 employees cannot claim this deduction under current federal law, even if they work from home full time, which is a frequent source of disappointment for remote employees.
You choose between two methods each year on Schedule C: the simplified method, a flat $5 per square foot of office space up to 300 square feet for a maximum $1,500 deduction, or the regular method, which prorates actual home expenses like mortgage interest or rent, utilities, insurance, and depreciation based on the percentage of your home's square footage used for business.
The regular method usually produces a bigger deduction for people with a large office relative to their home or an expensive home overall, but it requires tracking every relevant home expense through the year and comes with a wrinkle: claiming depreciation on your home office can trigger a small amount of depreciation recapture when you eventually sell the home. The simplified method avoids that recapture entirely and takes far less recordkeeping, which is why many people switch to it even when the dollar amount is smaller — you can change methods from year to year based on what benefits you more.
Example: comparing the two home office methods
A freelance writer has a 200-square-foot home office in a house where total housing costs — mortgage interest, utilities, insurance, and depreciation — come to $18,000 for the year, and the office is 10% of the home's total square footage.
Under the simplified method, 200 square feet times $5 gives a $1,000 deduction. Under the regular method, 10% of $18,000 in home expenses gives a $1,800 deduction — larger here, but requiring the writer to track every home expense and account for depreciation recapture later.
Frequently asked questions
Can I claim the home office deduction as a remote W-2 employee?
Do I need to use my home office every day to qualify?
Which home office method gives a bigger deduction?
Related Terms
Schedule C
The IRS form (Schedule C of Form 1040) used by sole proprietors and single-member LLCs to report business income and expenses. The net profit flows to your personal tax return.
Business Expenses
Costs incurred in running a business that are deductible on your tax return if they are ordinary (common in your industry) and necessary (helpful and appropriate for your trade).
Sole Proprietor
An individual who owns and operates an unincorporated business by themselves. Business income and expenses are reported on Schedule C of the personal tax return.
Self-Employment Tax
The combined Social Security (12.4%) and Medicare (2.9%) tax paid by self-employed individuals — effectively both the employee and employer shares of FICA, totaling 15.3%.