Home Office — Simplified vs Actual Method Calculator (2026)
Simplified method = $5/sq ft up to 300 sq ft ($1,500 max). Actual method tracks utilities, insurance, mortgage interest, depreciation × business use percentage. Larger home offices and higher-cost homes usually favor actual.
| Office % of home (business use) | — |
| Simplified deduction ($5 × sq ft, max $1,500) | — |
| Actual total home expenses | — |
| Actual business portion | — |
| Method advantage | — |
| Recommended method | — |
Self-employed taxpayers can deduct home office expenses two ways. The simplified method is $5 per square foot, capped at 300 sq ft for a $1,500 maximum deduction. The actual method allocates real home expenses (mortgage interest, property tax, utilities, insurance, repairs, depreciation) by the business-use percentage. Bigger offices, higher home costs, and high mortgage interest favor actual. W-2 employees cannot claim home office under current law.
Simplified Method — Easy, Capped, Safe
Simplified is $5/sq ft, capped at 300 sq ft = $1,500 max. No Form 8829 required, no depreciation calculation, no expense tracking. Goes directly on Schedule C line 30. The huge bonus: NO depreciation recapture when you sell your home. Simplified is the right choice if your office is under 200 sq ft, your home is paid off, or you plan to sell within 5 years. It's also the only sensible choice if you only have a home office part of the year.
Actual Method — Bigger Deduction, Bigger Complexity
Actual method allocates real expenses by office sq ft / total home sq ft. Annual depreciation = (purchase price - land value) / 39 years × business %. For a $500K home with $100K land value, business-use 12%, annual depreciation is about $1,230 — usually the biggest piece. Critical drawback: depreciation recapture at 25% rate on sale. Even if the home sale otherwise qualifies for the $250K/$500K Section 121 exclusion, the depreciation portion is recaptured separately as Section 1250 gain. Track depreciation carefully — IRS form 8829 calculates it for you. Best for taxpayers with large dedicated home offices, high home costs, and no plan to sell soon.
Last updated May 2026. Sources: IRS Publication 587.