Key takeaways
- The space must be used regularly and exclusively for business, and usually be your principal place of business.
- Simplified method: $5 per square foot for up to 300 square feet, so a maximum of $1,500. No depreciation and no carryover of any excess.
- Regular method: the business share of rent or mortgage interest, utilities, insurance, repairs and depreciation, figured on Form 8829 (IRS Publication 587).
- Under current federal law, W-2 employees who work from home can’t claim it.
What is the home office deduction?
If you run your business from a room in your home, part of what you pay to keep that home is really a business cost. The home office deduction lets sole proprietors, freelancers and other self-employed people claim that part on Schedule C line 30. Renters and homeowners both qualify, and the “office” can be a spare bedroom, a converted garage, a studio or even a clearly defined section of a room.
Save home office receipts and bills in one place with the Manage Receipt app.
Eligibility: regular and exclusive use
- Exclusive use: the area is used only for business. A guest room that hosts visitors, or a desk where the kids do homework, fails this test.
- Regular use: you use it for business on a continuing basis, not occasionally.
- Principal place of business: it’s where you do most of your work, or where you handle administrative tasks like billing and scheduling with no other fixed location to do them.
Some exceptions exist. A separate structure such as a detached studio, a place where you regularly meet clients, a daycare facility or storage space for inventory can qualify under different rules.
W-2 employees can’t take this deduction under current federal law, even if they work from home full time. It’s one of the unreimbursed employee expenses that most employees lost. If you have both a job and a side business, only the side business’s office can count.
Simplified method
Multiply the square footage of your office by $5, up to 300 square feet. The maximum deduction is $1,500. There’s no Form 8829, no depreciation and no need to track individual home bills for this deduction. Homeowners still deduct mortgage interest and property taxes in full on Schedule A if they itemize.
The deduction can’t be more than your business’s gross income minus other business expenses, and any excess is lost rather than carried forward.
Regular method
Divide the office square footage by the home’s total square footage to get your business percentage. Then apply that percentage to indirect expenses for the whole home:
- Rent, or mortgage interest and property taxes
- Utilities and internet, homeowners or renters insurance, HOA fees
- General repairs and maintenance
- Depreciation on the business portion of a home you own
Direct expenses that only affect the office, such as painting that room, are deducted in full. You figure it on Form 8829, and any amount disallowed by the income limit can carry forward to future years.
Which method saves more?
Sam, a freelance copywriter, rents a 1,500 sq ft apartment and uses a 150 sq ft spare room only as an office. Business percentage: 150 ÷ 1,500 = 10%.
| Simplified | Regular | |
|---|---|---|
| Calculation | 150 sq ft × $5 | 10% of yearly home costs |
| Rent ($1,800 × 12) | — | $21,600 × 10% = $2,160 |
| Utilities and internet | — | $3,000 × 10% = $300 |
| Renters insurance | — | $300 × 10% = $30 |
| Deduction | $750 | $2,490 |
The regular method gives Sam $1,740 more in deductions, but only if Sam keeps a year of rent, utility and insurance records.
| Simplified | Regular | |
|---|---|---|
| Maximum | $1,500 | No fixed cap (income limit applies) |
| Home bills needed | No | Yes |
| Depreciation | No | Yes, recaptured when you sell |
| Carry forward excess | No | Yes |
| Best for | Small offices, low-cost homes, minimal paperwork | Larger offices, high rent or home costs |
You can switch methods from year to year. Running both numbers takes minutes if your bills are already organized.
Records to keep
- A floor plan or measurements of the office and the whole home
- Photos showing the space is set up and used only for work
- Lease or mortgage statements, property tax bills and insurance policies
- Twelve months of utility and internet bills
- Receipts for repairs, with notes on whether they were for the office or the whole home
- For owners, the purchase price and improvement records needed for depreciation
Keep these at least as long as the return they support, and longer for depreciation records. See record retention for the timelines.
Your home bills, ready for Form 8829
Forward rent receipts, utility bills and insurance statements to Manage Receipt by email or scan them as they arrive, and keep your lease and floor plan in Doc Wallet. When it’s time to compare the simplified and regular methods, a full year of home costs is already in one place.
Explore AI Tax ReportsFrequently asked questions
Can W-2 employees claim home office?
No. Under current federal law, employees can’t deduct home office costs on their federal return, even if they work from home full time. Self-employed people can. If you have both a job and a side business, you can only claim the office used for the side business.
Simplified vs regular method?
The simplified method gives $5 per square foot up to 300 square feet, a maximum of $1,500, with no home bills to track. The regular method deducts your business percentage of actual home costs, including depreciation, and often gives more for larger offices or high rent. You can choose each year.
Does the home office deduction cause problems when I sell my home?
It can under the regular method. Depreciation you claimed, or could have claimed, on a home you own may be taxed when you sell. The simplified method has no depreciation, so there’s nothing to recapture. Renters don’t face this issue.
Can I deduct part of a room as a home office?
Yes, if that part is a clearly identifiable space used only for business, such as a section of a room set aside for your desk and files. It doesn’t need a wall, but personal use of the same area disqualifies it.