Who qualifies
Self-employed people with a space used exclusively and regularly for business. The space doesn't need to be a full room, a dedicated corner works, but it cannot be used for anything else. The office also generally needs to be your principal place of business, and administrative work counts: a contractor who performs jobs at client sites but runs scheduling, billing, and books from home qualifies on that basis.
What breaks the exclusive use test
A guest bed in the office, the family computer on the desk, or a workout bike in the corner all technically break exclusivity, because the test is about the space, not your intentions. The practical fix is to shrink the claimed space to the part that truly is business-only and measure that. A defined area within a room is fine; it does not need walls.
Simplified method
$5 per square foot, up to 300 sq ft. Maximum deduction $1,500. No depreciation, no depreciation recapture on sale. Simple and fine for most. It is the sensible choice for small spaces, for renters with low housing costs, and for anyone who wants to keep the sale of the house uncomplicated later.
Regular method
Actual expenses allocated by business-use percentage. Mortgage interest or rent, utilities, insurance, repairs, and depreciation on the home portion. More paperwork, often larger deduction. The percentage is office square footage over the home's total. For renters the math is often strongly in favor of the regular method, because a share of rent usually beats $5 per square foot and there is no depreciation recapture to think about.
Choosing between the methods
You can choose per year; picking simplified this year does not lock next year. Run both numbers once: if the regular method wins by a trivial margin, the simplified method's zero-recapture, zero-substantiation profile is usually worth the small difference. If it wins by a lot, keep the records and take it.
Why W-2 employees can't claim it
TCJA eliminated unreimbursed employee business expenses (including home office) from 2018 through 2025, and 2025 legislation made that suspension permanent. If your employer reimburses through an accountable plan, it's tax-free to you. That reimbursement route is the practical answer for remote employees: the deduction is gone, but a properly structured employer plan delivers the same economics.
Documentation worth keeping
Measure the space and keep the number, take a few photos, and hold onto utility bills and the mortgage or rent records for any year you use the regular method. Under the regular method you will also want the depreciation schedule preserved permanently, because the recapture calculation at sale reaches back through every year the office was claimed.
Common questions
- Does claiming it trigger an audit?
- This myth is outdated. Properly documented home office deductions are not a notable audit flag.
- What about recapture when I sell the house?
- Under the regular method, depreciation taken is recaptured at 25% on sale. Simplified method has no recapture.
- I have a W-2 job and a side business. Can I claim it?
- Yes, for the side business, if the space is used exclusively for that business. The W-2 job doesn't taint the deduction; using the same desk for your day job does.
- Does the office have to be a whole room?
- No. A clearly defined area works. The area claimed just has to pass the exclusive use test on its own.
- Can my S-corp pay me for my home office?
- Yes, through an accountable-plan reimbursement, which is the correct route once you have an S-corp. The corporation reimburses documented home office costs, deducts them, and the payment is not income to you. Owners should not claim a Schedule C style home office against S-corp wages.
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