Home Office Deduction Calculator

Two methods, one choice each year

If you're self-employed and use part of your home regularly and exclusively for business, you can deduct it two ways. The simplified method pays a flat $5 per square foot, capped at 300 square feet — a maximum deduction of $1,500, with no receipts to keep. The actual expense method deducts your business-use percentage (office area ÷ total home area) of real costs: rent or mortgage interest, utilities, insurance, repairs and depreciation.

The actual method almost always wins for larger spaces or expensive housing markets, but it demands records. The calculator above runs both and shows the gap, plus what the winning deduction is worth at your tax rate.

Two rules trip people up. "Exclusively" is strict — a desk in the corner of a bedroom that doubles as a guest room generally doesn't qualify. And the deduction can't create a loss: it's limited to your business income for the year, though unused amounts can carry forward under the actual method. This is an estimate, not tax advice; check with a CPA before filing.

What "regular and exclusive" actually means

The exclusivity test is the one that disqualifies most claims, and it is stricter than people expect. The space must be used only for business — not mostly, not usually. A spare room that becomes a guest bedroom twice a year fails. A dining table you clear at six o'clock fails. A partitioned corner of a larger room can qualify, because the rule is about the space rather than the walls, but you should be able to describe its boundaries and point to them.

"Regular" means ongoing use rather than occasional. Working from the room three days a week all year qualifies; using it for two weeks during a busy period does not. The space must also be your principal place of business, which for most freelancers it is — though it still counts if you meet clients elsewhere, as long as the administrative and management work happens at home.

Choosing between the two methods

The simplified method wins on effort and loses on money for most people with a reasonable amount of space. It requires no receipts and no depreciation tracking, which genuinely matters if your records are thin, but it caps at $1,500 no matter how large your office or how expensive your housing. The actual method has no ceiling and typically produces two to four times the deduction in a high-cost area — the example above yields $2,625 against $750.

The trade is record-keeping. The actual method requires you to total rent or mortgage interest, utilities, insurance, repairs and maintenance for the year, and to apply the business-use percentage consistently. Repairs to the office itself are fully deductible; repairs to the whole house are apportioned; repairs to a purely personal area are not deductible at all. You can switch methods from year to year, so running both calculations each January is worth the few minutes it takes.

The depreciation catch worth knowing

If you own your home and use the actual expense method, part of the deduction comes from depreciating the business portion of the property. That reduces tax now, but the depreciation you claimed is generally recaptured as taxable gain when you sell — even if the overall sale qualifies for the primary-residence exclusion. It is not a reason to avoid the deduction, which usually still comes out ahead, but it is a reason to keep records of what you claimed and to raise it with whoever prepares your return in the year you sell.

Related deductions people miss alongside it

The home office is often the gateway to others. Once you have a qualifying principal place of business, trips from home to a client site become deductible business mileage rather than non-deductible commuting, which can be worth more than the home office itself. The business share of internet and phone bills, a second monitor, a desk chair and office supplies are all deductible independently of which home-office method you choose. Each dollar of expense reduces both income tax and self-employment tax — see our self-employment tax calculator for the combined effect.

Frequently asked questions