If you work from home, you may be eligible for the home office deduction, a valuable tax benefit that allows you to deduct certain expenses related to your home workspace. To qualify, your workspace must be used exclusively and regularly for business purposes, and it must be your principal place of business.
The IRS offers two methods to calculate this deduction: the simplified option, which allows a standard deduction of $5 per square foot up to 300 square feet, and the regular method, which involves calculating actual expenses based on the percentage of your home used for business.
Let’s break down who qualifies, how much you can claim, and how to help you follow IRS rules.
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Who Qualifies for the Home Office Deduction?
The home office deduction is available to self-employed individuals, freelancers, and small business owners who use a portion of their home exclusively and regularly for business purposes.
To qualify, you must meet one of the following criteria:
- Exclusive use test – The space you’re deducting must be used solely for business purposes. A guest bedroom that doubles as an office doesn’t qualify.
- Regular use test – You must use the space consistently for business activities (not just occasionally).
- Principal place of business test – Your home office must be your primary place of business or where you meet clients/customers regularly.
Important Note: If you are a W-2 employee, you do not qualify for the home office deduction, even if you work remotely. The deduction is only available to self-employed individuals or business owners.
For more IRS details, check out the IRS Home Office Deduction Guide.
How Much Can You Claim?
There are two methods to calculate the home office deduction:
1. Simplified Method
- The IRS allows a standard deduction of $5 per square foot of your home office space, up to a maximum of 300 square feet.
- This means the maximum deduction is $1,500.
- This method is easy and requires minimal record-keeping.
Check out the IRS Guidelines for Simplified Option for more details.
2. Actual Expenses Method
- This method requires tracking all home-related expenses, including:
- Rent or mortgage interest
- Utilities (electricity, water, internet)
- Property taxes
- Home insurance
- Depreciation (if you own your home)
- You can deduct a percentage of these expenses based on the square footage of your office space compared to your total home size.
- While this method requires more detailed records, it can often result in larger deductions.
How to Claim the Home Office Deduction
To claim your deduction, use Form 8829 (Expenses for Business Use of Your Home) if using the actual expenses method or Schedule C (Profit or Loss from Business) when filing your self-employed tax return.
The IRS may scrutinize home office deductions, so you should focus on:
- Keeping records of all expenses.
- Taking photos of your dedicated office space as proof.
- Avoiding claiming dual-purpose spaces (like using your kitchen table as a workspace).
It’s crucial to ensure that your home office meets the IRS’s strict criteria for exclusive and regular use, as improper claims can lead to disallowed deductions or potential audits.
Final Thoughts
The home office deduction can be a powerful tax-saving tool if you qualify and follow IRS rules. Choosing the right calculation method helps you maximize your deductions while staying compliant.
If you need guidance, Beckley & Associates PLLC — a trusted tax, advisory and accounting firm serving clients across Dallas, Plano, and beyond — is here to help you navigate tax strategies for self-employed professionals.
Don’t miss our guide on Overlooked Small Business Tax Deductions to help you uncover additional valuable deductions that could benefit your business.C
Contact us today to get started.