Home Office Deduction:
Simplified or Actual
— Which Wins for You?
The IRS gives you two methods to deduct your home office. The simplified method is easy ($5/sq ft, max $1,500). The actual expense method calculates a percentage of every home cost you paid. One is almost always significantly larger. This calculator shows you which — in real time.
Only available to self-employed filers who use a dedicated space exclusively for business. W-2 employees cannot claim this deduction under current federal law.
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How the Home Office Deduction Works
The home office deduction lets self-employed filers deduct a portion of their home costs when they maintain a dedicated space used regularly and exclusively for business. It’s reported on IRS Form 8829 and flows through to Schedule C, Line 30.
W-2 employees cannot claim this deduction under current federal law following the 2017 Tax Cuts and Jobs Act. If you’re a remote employee, ask your employer about an accountable plan reimbursement instead.
The Two Requirements: Regular and Exclusive Use
The space must be used regularly (consistently, not just occasionally) and exclusively for business — meaning no personal use at all. A dedicated room used only as your office easily qualifies. A desk in your bedroom or a kitchen table used for both meals and work does not. The IRS guidance in Publication 587 spells this out in detail.
Simplified Method: Easy but Often Leaves Money Behind
The simplified method allows $5 per square foot of your dedicated office space, up to a maximum of 300 square feet — meaning the maximum deduction is $1,500/year. No Form 8829 required. The trade-off: you cannot also deduct the mortgage interest or property taxes allocated to your office on Schedule A.
Actual Expense Method: More Work, Usually More Money
The actual expense method calculates your office’s percentage of your home’s total square footage, then applies that percentage to every qualifying home cost: utilities, rent or mortgage interest, home insurance, repairs, and property taxes. It requires Form 8829 but typically produces a much larger deduction — especially for homeowners with mortgages.
The Home Office Unlocks Other Deductions
Beyond the direct deduction, qualifying for a home office has a ripple effect on other write-offs:
- Business mileage — your home becomes your principal place of business, turning client trips from home into deductible miles (not commuting)
- Internet costs — the business-use portion becomes fully deductible
- Office furniture and equipment — desks, chairs, monitors deducted at 100%
- Software subscriptions — business tools deducted separately from the home office itself
Depreciation Warning for Homeowners
The actual expense method also includes a depreciation component for owned homes that this calculator doesn’t include for simplicity. Depreciation can increase your current deduction, but it also creates a depreciation recapture obligation when you sell your home. This calculator shows the non-depreciation portion. Talk to a CPA if depreciation is significant for your situation.