Home Office Deduction Calculator
Calculate the home office deduction two ways — IRS simplified method vs actual expense method — and see which saves more tax.
Two Ways to Claim the Home Office Deduction
The IRS allows self-employed taxpayers (and pre-2026 employees with W-2 — currently suspended through 2025 OBBB extensions) to deduct expenses for the portion of home used regularly and exclusively for business. Two methods:
Simplified Method ($5/sq ft): Multiply office square footage (max 300 sq ft) by $5 = max $1,500 deduction. No depreciation recapture on home sale. Simple paperwork — one line on Schedule C.
Actual Expense Method: Calculate the business-use percentage (office sq ft ÷ total home sq ft) and apply it to indirect expenses (rent or mortgage interest, utilities, insurance, depreciation, repairs). Plus 100% of direct office expenses (office-only paint, dedicated phone line). More paperwork (Form 8829) but often a bigger deduction. Source: IRS Publication 587. Last updated: May 2026.
Regular and Exclusive Use — The Disqualifier
The office must be used regularly (on a continuing basis, not occasionally) AND exclusively for business. The exclusivity test fails if: the kids play in the office on weekends, the kitchen table doubles as your workspace, the guest bedroom hosts overnight guests twice a year. Two exceptions: daycare facilities and storage of inventory or product samples (regular use is enough).
When Simplified Beats Actual (and Vice Versa)
Simplified wins when: (1) your home is in a low-cost area where total housing expenses are modest, (2) you rent and have few utilities to allocate, or (3) you don't want to track expenses or file Form 8829.
Actual wins when: (1) you own and have substantial mortgage interest + depreciation + utilities — easily $10K+/year × 10% business use = $1,000+ vs simplified's max $1,500, (2) your office is over 300 sq ft (simplified caps at 300), or (3) you have significant direct office expenses (custom built-ins, dedicated AC unit, large office paint job).
Depreciation Recapture Trap — Watch This Before Selling
If you use the actual expense method and claim depreciation, the IRS recaptures that depreciation when you sell the home — at 25% maximum rate. Example: 10 years of $1,500/yr depreciation = $15,000 recapture × 25% = $3,750 tax owed at sale. The simplified method has NO depreciation and therefore NO recapture — making it superior for homeowners planning to sell in the next 5-10 years.