Home Office Deduction

The home office deduction allows self-employed individuals and certain business owners to deduct expenses related to the business use of their home. This valuable deduction is often overlooked or misunderstood.

Qualification Requirements

Your home office must be used regularly and exclusively for business. "Regular" means consistent business use, not occasional. "Exclusive" means the space is used only for business—a desk in a family room doesn't qualify.

The space must also be your principal place of business, or a place where you meet clients in the normal course of business, or a separate structure used in connection with your business.

Two Calculation Methods

Simplified Method: Deduct $5 per square foot of home office space, up to 300 square feet ($1,500 maximum). Simple but often provides less benefit than the regular method.

Regular Method: Calculate actual home expenses (mortgage interest, rent, utilities, insurance, repairs, depreciation) and multiply by the business-use percentage (office square footage ÷ total home square footage).

Deductible Expenses

Direct expenses benefiting only the office (painting the office, for example) are fully deductible. Indirect expenses benefiting the entire home are deductible based on the business-use percentage. These include rent or mortgage interest, real estate taxes, utilities, homeowner's insurance, repairs and maintenance, and depreciation (for owned homes).

Important Considerations

The home office deduction cannot create a business loss—it's limited to business income from activities conducted in the home office. Excess deductions carry forward. If you sell your home after claiming depreciation, you may owe recapture tax. Employees cannot claim home office deductions under current law (suspended through 2025 by TCJA).