Home Office Deduction Calculator
Either deduction is limited to your business's net income. The regular method needs receipts for every cost.
How the home office deduction calculation works
Compare the IRS simplified home office deduction ($5 per sq ft, up to 300 sq ft) with the regular method, from your square footage and home costs.
The space must be used regularly and only for business
IRS Pub 587 calls these the exclusive use and regular use tests. A desk in the guest room you also use for visitors usually doesn't qualify. A spare room used only as an office does.
Simplified method: $5 per square foot
Multiply office square feet by $5, up to 300 sq ft. A 200 sq ft office gives $1,000; the most anyone can claim is $1,500.
Regular method: business share of real costs
Divide office area by home area, then apply that share to rent or mortgage interest, utilities, insurance, repairs and depreciation. 200 ÷ 1,500 is 13.33%.
Pick the larger, within your business income
You can choose each year, and switching is not a change in accounting method. Either deduction is limited by your business income. Under the regular method, the unused part carries over to the next year you use actual expenses.
Worked example. A 200 sq ft office in a 1,500 sq ft home is 13.33% business use. With $23,400 of yearly home costs the regular method gives $3,120.00, against $1,000.00 for the simplified method, so the regular method is worth $2,120 more.
Home Office Deduction FAQ
How do I calculate the home office deduction?
Either multiply office square feet by $5 (up to 300 sq ft), or apply the office's share of your home's area to your yearly home costs. Use whichever is larger.
What is the maximum simplified home office deduction?
$1,500: 300 square feet at $5 per square foot.
Can W-2 employees take the home office deduction?
No. The IRS says employees can no longer claim a home office deduction, because miscellaneous itemized deductions for employee business expenses were eliminated for tax years beginning after 2017, even with the simplified method. It's for self-employed people and business owners; employees can ask their employer about reimbursement instead.
What is Form 8829?
Form 8829, Expenses for Business Use of Your Home, is where Schedule C filers figure the regular-method deduction from actual costs and depreciation. If you use the simplified method, you use the Simplified Method Worksheet in the Schedule C instructions instead.
What does regular and exclusive use mean?
Exclusive use means the area is used only for your business, though it doesn't need a permanent wall. Regular use means steady business use, not occasional. Pub 587 lists exceptions, such as storing inventory or running a daycare.
Which method is better, simplified or regular?
The regular method usually wins when rent or housing costs are high. The simplified method saves record-keeping: there is no home depreciation deduction and no later recapture for the years you use it, and mortgage interest and property tax go in full on Schedule A if you itemize.
Is the result my final deduction?
It's an estimate and isn't tax advice. Income limits, mortgage rules and depreciation can change the amount on Form 8829.
Sources: IRS: Simplified option for home office deduction · IRS: Publication 587, Business use of your home · IRS: About Form 8829