Home Office Deduction
A tax deduction for self-employed individuals that allows a portion of home expenses to be deducted for space used exclusively and regularly for business.
What is Home Office Deduction?
The home office deduction allows self-employed taxpayers and business owners to deduct expenses related to the portion of their home used regularly and exclusively for business. The IRS offers two calculation methods: the simplified method ($5 per square foot of office space, up to 300 sq ft, maximum $1,500 deduction) and the regular method, which allocates actual home expenses — mortgage interest or rent, utilities, insurance, repairs, and depreciation — proportionally based on the ratio of office square footage to total home square footage. Employees working from home generally cannot claim this deduction under current law following the 2017 Tax Cuts and Jobs Act. The deduction is claimed on Schedule C for sole proprietors.
Example
A freelance writer uses a 200 sq ft dedicated home office in a 2,000 sq ft house (10% of total area). Using the regular method, she deducts 10% of $30,000 in annual housing costs — $3,000 including rent, utilities, and renters insurance — reducing her self-employment income and associated self-employment tax.