Guide

Home office deduction: simplified vs actual, and who qualifies

Who qualifies for the home office deduction, the exclusive-use test, the simplified $5 per square foot method versus actual expenses, and how to record it.

The home office deduction is real, common and audited less than people fear, provided the space is used exclusively and regularly for business.

The test

A specific area of your home used exclusively (no guest bed, no family computer) and regularly for business, and it is your principal place of business or where you meet clients. A corner of a room counts if it is only used for work.

Simplified method

$5 per square foot, up to 300 square feet, so a maximum of $1,500. No depreciation, no recapture when you sell. Most people should use this.

Actual expenses

Business percentage (office square feet divided by home square feet) of rent or mortgage interest, utilities, insurance, repairs, plus depreciation on the home. Bigger deduction for large offices in expensive homes, with more paperwork (Form 8829) and depreciation recapture on sale.

Recording it

The simplified deduction is a year-end entry, not a transaction. Your preparer adds it. If you use actual expenses, categorize the full household bills as home office and apply the percentage at year end.

FAQ

Questions, answered

Can I take it if I also have an office elsewhere?

Only if the home office is where you do administrative work and there is no other fixed location for it. Many trades and field businesses qualify this way.

Your books, done tonight.

Create a free account, drop in a bank statement, and watch every transaction get categorized. 100 free credits to start, 10 more every day. No card required.

Takes about 90 seconds. No sales call, no onboarding fee, no contract.

Start free