Deductions
Home office deduction: simplified vs regular method for the self-employed
Self-employed people and partners can deduct a home office used exclusively and regularly for business. Compare the IRS simplified method ($5 per square foot, up to 300 square feet) with the regular method, with a worked example and the forms each uses.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
Self-employed people and partners can deduct part of their home if they use it exclusively and regularly for business, for example as their principal place of business. The IRS offers two ways to figure it: the simplified method at $5 per square foot for up to 300 square feet, or the regular method, which deducts the business share of actual home expenses on Form 8829. Employees can't claim it, even under the simplified method.
Who can claim the home office deduction
The deduction is for people who are self-employed or partners. The IRS says employees can't claim a deduction for business use of the home, even under the simplified option, because miscellaneous itemized deductions for employee business expenses were eliminated for tax years after 2017.
A home can be a house, apartment, condominium, mobile home, boat or similar property. It also includes unattached structures on the property, such as a garage, studio, barn or greenhouse.
The tests your space has to meet
Exclusive use means a specific room or other separately identifiable space is used only for the business. It doesn't need a permanent wall. A space used for both business and personal purposes doesn't meet the test.
On top of exclusive and regular use, the space generally has to fit one of these uses:
- Your principal place of business. This includes a home office used for administrative or management activities when there is no other fixed location where you do substantial administrative or management work.
- A place where you meet patients, clients or customers in the normal course of business.
- A separate free-standing structure, such as a studio, workshop, garage or barn, used exclusively and regularly for the business. It doesn't have to be your principal place of business.
- Two exceptions to exclusive use: space used regularly to store inventory or product samples, if you sell products at wholesale or retail and the home is the only fixed location of the business, and space used as a daycare facility.
Simplified method vs regular method
You choose a method each year on a timely filed, original return. Once chosen for a tax year, it can't be changed for that year. You can use a different method the next year.
How the simplified method works
Multiply the square footage used for business, up to 300, by $5. Home-related itemized deductions such as mortgage interest and real estate taxes go on Schedule A in full, and there's no depreciation deduction for the year.
The deduction can't be more than the gross income from the business use of the home, minus business deductions that don't relate to the home. Expenses above that limit don't carry over. If you have a carryover from a year you used actual expenses, you can't deduct it in a simplified-method year. It waits for the next year you use actual expenses.
Part-year use and changes in office size use a monthly average. Add up the allowable square feet for each month and divide by 12. A month with fewer than 15 days of business use counts as zero.
If you run more than one qualifying business from the same home, the simplified method covers all of them and the 300 square feet cap is shared. If you used more than one home during the year, you can use the simplified method for only one of them and must use actual expenses for the others.
How the regular method works
First figure the business percentage. The common way is to divide the area used for business by the total area of the home. If all rooms are about the same size, you can divide the number of business rooms by the total number of rooms.
Direct expenses, which are only for the business part of the home, are deductible in full. Indirect expenses for the whole home are deducted by the business percentage. The IRS lists the business part of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. Unrelated expenses, such as lawn care, aren't deductible. The base local charge for the first landline into the home is a personal expense, though business long-distance calls or a second line used for business can be deducted.
If you own the home, the business part is depreciated. A home first used for business in 2025 is depreciated as nonresidential real property under MACRS, straight line over 39 years. When expenses exceed the gross income limit, the extra carries over to the next year you use actual expenses.
If you later switch from the simplified method to the regular method, depreciation is figured using the appropriate optional depreciation table.
Where the deduction goes on your return
Schedule C filers report the whole home office deduction on line 30 of Schedule C. Under the regular method they attach Form 8829. Farmers report it on line 32 of Schedule F.
Form 8829 isn't used by partners claiming actual home expenses or by Schedule F filers. They use the Worksheet To Figure the Deduction for Business Use of Your Home in Publication 587, or the Simplified Method Worksheet there if they use the simplified method.
Selling the home later has its own rule. If the office was part of the home itself, you don't split the gain between business and personal use, but you can't exclude the part of the gain equal to depreciation allowed or allowable after May 6, 1997. Records proving the deduction are kept for at least 3 years from the return's due date or filing date, or 2 years after the tax was paid, whichever is later.
Aldro prepares Schedule C, Form 8829 and the rest of the yearly return for one flat price that covers everything tax.
Worked example
Say a self-employed designer rents a 2,000 square foot apartment and uses a 200 square foot room only for the business, which is her principal place of business. The business percentage is 200 ÷ 2,000 = 10%. Simplified method: 200 × $5 = $1,000. Regular method: rent of $24,000, utilities of $3,000 and renter's insurance of $600 for the year are indirect expenses, so 10% of $27,600 = $2,760. Painting only the office for $300 is a direct expense, deductible in full. Regular-method total: $3,060, as long as the business's gross income covers it. In this case the regular method gives the larger deduction, but it needs Form 8829 and records of every expense. With a 400 square foot office, the simplified method would still stop at 300 square feet, or $1,500.
Common questions
What is the simplified home office deduction?
An IRS option that lets you deduct $5 per square foot of the home used for business, up to 300 square feet. There's no depreciation deduction and no recapture for those years, and mortgage interest and real estate taxes go on Schedule A in full.
Can a W-2 employee working from home claim the deduction?
No. The IRS says employees can't claim it, even under the simplified option, because employee business expenses were eliminated as miscellaneous itemized deductions for tax years after 2017.
Can I switch between the simplified and regular method?
Yes, from year to year. You choose on a timely filed, original return, and the choice can't be changed for that year. Switching to the regular method later means using the optional depreciation tables.
Does the room have to be used only for business?
Generally yes. Mixed business and personal use disqualifies the space. The exceptions are regular storage of inventory or product samples when the home is the only fixed business location, and daycare facilities.
What happens to a carryover if I use the simplified method this year?
You can't deduct it that year. A carryover from a regular-method year waits until the next year you use actual expenses.
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Sources
- IRS Publication 587: Business use of your home · checked October 31, 2026
- IRS: Simplified option for home office deduction · checked October 31, 2026
- IRS Tax Topic 509: Business use of home · checked October 31, 2026
- IRS: Instructions for Form 8829 · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.