Business Owner
intermediate · $50K - $100K
If you use part of your home regularly and exclusively for business, deduct either $5 per sq ft (max 300 sq ft = $1,500) or actual expenses (mortgage interest, utilities, repairs) proportionally.
Self-employed only.
Annual Limit
$1,500 simplified / unlimited actual
Key takeaways
- Available to the self-employed for space used regularly and exclusively for business.
- Two methods: simplified ($5/sq ft up to 300 sq ft, max $1,500) or actual expenses (a proportional share of home costs).
- W-2 employees cannot claim it, even when working from home full-time.
- The actual-expense method can be larger but requires record-keeping and may create depreciation recapture when you sell.
Simplified vs. actual expense method
| Simplified | Actual expense | |
|---|---|---|
| Deduction | $5/sq ft, up to $1,500 | Proportional share of home costs |
| Record-keeping | Minimal | Detailed |
| Depreciation recapture at sale | No | Possible |
Self-employed only. General mechanics, not a recommendation.
Requirements
- Self-employed or independent contractor
- Space used regularly and exclusively for business
- Principal place of business or meet clients there
How to Implement
- 1Measure home office square footage
- 2Choose simplified method ($5/sq ft, max $1,500) OR actual expense method
- 3Track all home expenses if using actual method
- 4Report on Schedule C (Form 1040)
The bottom line
The home office deduction rewards a dedicated workspace, with a simple flat method or a larger actual-expense method. Which one comes out ahead depends on your home costs and appetite for record-keeping.
Frequently Asked Questions
Related business owner strategies
Sources
- Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
- Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
- Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits
Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.