Home Office Deduction Calculator

The home office deduction lets self-employed people write off the part of their housing costs that goes to running a business. There are two ways to work it out and you may pick whichever gives the bigger number, switching between them from one year to the next.

Simplified method: Deduction = Office Area (sq ft) x $5 per sq ft Capped at 300 sq ft, so $1,500 is the most it can ever produce. No receipts, no depreciation schedule, one line on the return.

Metric note: multiply m² by 10.764 to get sq ft. Deduction = Office Area (m²) x 10.764 x $5

Regular method: Business Use % = Office Area / Total Home Area x 100 Deduction = Total Home Expenses x Business Use %

Count rent or mortgage interest, property tax, all utilities, home and renter insurance, repairs, and depreciation if you own. Internet and a repair made only to the office room are deductible in full rather than at the business percentage, so keep those separate.

Worked example: A 200 sq ft spare room in a 1,500 sq ft house, $24,000 of annual housing costs.

• Business use: 200 ÷ 1,500 = 13.3%
• Simplified: 200 × $5 = $1,000
• Regular: $24,000 × 13.3% = $3,200

The regular method wins by $2,200 here, and it usually does once rent is involved. The simplified rate has not moved since 2013, and $5 a square foot has not reflected what housing costs for a long time.

Two things this deduction does that most write-offs do not. It comes off Schedule C, so it cuts self-employment tax as well as income tax, which makes each dollar worth roughly 14 cents more than a plain itemized deduction. And it cannot create a loss: the regular method is capped at the gross income from the business after other expenses, with the excess carried forward to a future year.

Who qualifies:

• The space must be used regularly and exclusively for the business. A desk in the corner of the living room fails the exclusive test, and so does a guest room that is a guest room twice a year.
• It must be your principal place of business, or a place you regularly meet clients.
• Self-employed, contractors, gig workers, partners in a partnership.
• W-2 employees cannot claim it at all since 2018, even working from home full time.

The catch nobody mentions: depreciation claimed under the regular method is recaptured at 25% when you sell the house, and the gain on the office portion does not get the usual home-sale exclusion. On a house you plan to sell soon, the simplified method can be the cheaper answer even when it produces a smaller deduction.