Find out which home office method gives you the bigger deduction. The simplified method allows $5 per square foot up to 300 sq ft; the regular method deducts your office's share of rent or mortgage interest, taxes, insurance, utilities and repairs, plus depreciation if you own.
Last updated:
Office and business
sq ft
Used regularly and only for business.
sq ft
$
$
Supplies, software, travel, etc.
%
Used to estimate the tax saved.
Yearly home expenses (whole home, full year)
Do you own or rent?
$
$
$
$
$
$
$
$
Painting or repairs only in the office (100%).
$
Use the lower of basis or market value when the office started.
$
Land is not depreciated.
Enter your values to see the result.
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How to use the Home Office Deduction Calculator
Measure your office and your whole home in square feet and enter both.
Enter your business income and other business expenses; the deduction cannot exceed what is left.
Choose own or rent and enter full-year home expenses.
Owners: add your home's cost basis and land value for depreciation.
Press Calculate deduction to see which method wins and by how much.
The two methods compared
Simplified method
Regular method (Form 8829)
Formula
$5 × office sq ft (max 300)
Business-use % × home expenses + direct costs + depreciation
Maximum
$1,500 a year
No fixed maximum
Depreciation
None
Yes, 39-year straight line on the building
Over the income limit
Lost
Carried forward
Mortgage interest & taxes
Fully on Schedule A
Office share on Form 8829, rest on Schedule A
Records
Square footage only
Receipts for every expense
You can switch methods from year to year.
Regular method step by step
Business-use % = office sq ft ÷ home sq ft
Limit = gross business income − business expenses not related to the home
Tier 1: office share of mortgage interest and real estate taxes
Tier 2: office share of rent, insurance, utilities, repairs and HOA fees, plus direct office costs, up to the remaining limit
Tier 3: depreciation = (basis − land) × business-use % × 2.564% for a full year, up to what is left
Example: a 200 sq ft office in an 1,800 sq ft owned home (11.11%). With $11,000 of mortgage interest, $4,200 of property tax, $6,300 of insurance, utilities and repairs and a $300,000 building basis, the regular method gives about $1,689 + $700 + $855 = $3,244, versus $1,000 with the simplified method.
Later full years use 2.564%. Source: IRS Publication 946, nonresidential real property table.
Frequently asked questions
How does the simplified home office deduction work?
You multiply the square footage of your office, up to 300 square feet, by $5. The maximum is $1,500 a year. There is no depreciation and no carryover, and you can still deduct all of your mortgage interest and property taxes on Schedule A if you itemize.
How do I calculate the regular method?
Divide the office area by the home's total area to get the business-use percentage, then apply it to indirect costs such as rent or mortgage interest, property taxes, insurance, utilities and general repairs. Add expenses only for the office at 100%, and for an owned home add depreciation on the building portion over 39 years. You report it on Form 8829.
Which method gives a bigger deduction?
The regular method usually wins when your office is a large share of the home or your housing costs are high, especially for owners who can depreciate. The simplified method is easier and can win for small offices in low-cost homes or when you want to avoid depreciation recapture later.
Can W-2 employees claim the home office deduction?
Not on their federal return. Unreimbursed employee expenses, including a home office, are no longer deductible for employees. The deduction is for self-employed people, freelancers, independent contractors and business owners.
What is the gross income limit?
The home office deduction cannot create a loss. It is limited to your gross business income minus your other business expenses. Under the regular method, unused operating expenses and depreciation carry over to future years; under the simplified method, anything above the limit is lost.
Does the space have to be used only for business?
Yes. The area must be used regularly and exclusively for business, such as a spare room used only as an office, and be your principal place of business or a place where you meet clients. Daycare providers and inventory storage have special exceptions.
What happens to depreciation when I sell my home?
Depreciation you claimed (or could have claimed) after May 6, 1997 is taxed at up to 25% when you sell, even if the rest of your gain qualifies for the home sale exclusion. That is one reason some people prefer the simplified method.
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