The home office deduction, without the myths

Few deductions carry as much folklore as the home office. People skip it because they've heard it triggers audits, or claim it for a kitchen table they also eat at. Neither is right. If your space qualifies, it's a legitimate deduction — you just need to meet the rules.

Who qualifies

You're eligible if you're self-employed (including partners and sole proprietors) and part of your home is used:

• Regularly — on a continuing basis, not occasionally; and
• Exclusively for business — a spare room that's also a guest room doesn't qualify, though a clearly defined area of a room can.

It also has to meet one of these tests:

• It's your principal place of business. This includes a space used for administrative or management work, such as billing and scheduling, if there's no other fixed location where you do substantial amounts of that work.
• You regularly meet clients or customers there.
• It's a separate structure, such as a detached studio or garage workshop, used for the business.

Storage of inventory or product samples and licensed daycare facilities have their own exceptions to the exclusive-use rule.

W-2 employees can't take it. The deduction for unreimbursed employee expenses was suspended in 2018, and the 2025 law made that permanent. If you're an employee who works remotely, the deduction isn't available on your federal return.

The two ways to calculate it

Simplified method

Multiply the square footage of your office by $5, up to 300 square feet — a maximum of $1,500. No depreciation, no tracking of utility bills, and you keep your full mortgage interest and property taxes as itemized deductions.

Regular method

Figure the percentage of your home used for business (office square footage divided by total square footage) and apply it to your actual home expenses: rent or mortgage interest, property taxes, insurance, utilities, repairs, HOA dues and, for owners, depreciation on the building. You report this on Form 8829.

You can choose the method each year. The deduction under either method is generally limited to your business's net income, though under the regular method disallowed amounts can carry forward.

A worked example

A consultant rents a 1,500-square-foot apartment for $3,000 a month and uses a 225-square-foot room exclusively as an office — 15% of the home.

For renters in higher-cost areas, the regular method is often worth several times more. For homeowners, the math also depends on depreciation and how much of the mortgage interest and property tax you'd deduct anyway.

If you own an S-corporation

S-corp owners are employees of their company, so they can't take the deduction directly on their personal return. Instead, the company can reimburse you for the business-use share of home expenses under an accountable plan: a written policy, a monthly or quarterly expense report, and a reimbursement payment. The company deducts the reimbursement, and it isn't taxable to you.

What happens when you sell your home

If you're a homeowner using the regular method, the depreciation you claimed (or were entitled to claim) reduces your basis. When you sell, that depreciation is generally taxable even if the rest of your gain is excluded under the home-sale exclusion. It's usually a modest amount, but it's worth knowing before you choose a method.

To keep the deduction solid, keep a simple floor plan with measurements, a photo of the space, and your home expense statements. That's the whole audit file.