Home office deduction: who qualifies and how to calculate it
If you run your business from home, a slice of your rent, utilities, and insurance can become a deduction. Here's who qualifies and the two ways to calculate it.
The two-part qualifying test
To deduct a home office, the space has to pass both halves of one rule, regular and exclusive use:
- Regular, you use it for business on a continuing basis, not just now and then.
- Exclusive, that area is used onlyfor business. A spare room that's your office passes; the dining table you also eat dinner at does not.
It also has to be your principal place of business- where you do most of your work or your management and admin, or a place you regularly meet clients, or a separate structure (like a detached studio). A dedicated corner of a room can count if it's used exclusively for work.
Method 1: simplified
Deduct $5 per square foot of office space, up to 300 sq ft, so a maximum of $1,500. No receipts, no depreciation tracking. Best when your office is small or your home costs are modest.
Method 2: actual expenses
Figure your business-use percentage (office sq ft ÷ total home sq ft), then deduct that share of:
- Rent, or mortgage interest and property tax
- Utilities, electricity, gas, water, internet
- Homeowners or renters insurance
- Repairs and maintenance that benefit the whole home
- Depreciation (homeowners)
More paperwork, but often a bigger deduction if you rent in an expensive area or have a large office. File it on Form 8829.
Frequently asked
Who can claim the home office deduction?
Self-employed people who use part of their home regularly and exclusivelyas their principal place of business, or to meet clients, or as a separate structure used for the business. W-2 employees generally cannot claim it on their federal return through 2025 under current law. The space must be used only for business: a kitchen table you also eat at doesn't qualify.
How do I calculate the home office deduction?
Two methods. The simplified method deducts $5 per square foot of office space up to 300 square feet, a maximum of $1,500, no receipts required. The actual-expense method takes the business-use percentage of your home (office square footage ÷ total square footage) and applies it to rent or mortgage interest, utilities, insurance, repairs, and depreciation. Pick whichever gives the bigger deduction; you can switch year to year. See IRS Publication 587 and Form 8829.
Can I claim a home office if I'm a W-2 employee?
Generally no, not on your federal return. The unreimbursed-employee home office deduction is suspended for employees through 2025 under the Tax Cuts and Jobs Act. If you're self-employed, even as a side gig, you can still claim it for that business. A few states allow an employee version on the state return, so check your state's rules.
This guide is general information, not tax, legal, or accounting advice, and isn't a substitute for a licensed CPA or tax attorney. Tax rules change and depend on your situation; figures here are illustrative. Verify specifics against current IRS guidance or with your preparer.