Tax glossary

Home Office Deduction

Home Office Deduction — what it means, how it works, and a real example, explained without the jargon.

What is Home Office Deduction?

The home office deduction lets self-employed people write off the part of their home used regularly and exclusively for business.

How it works

You can use the simplified method — $5 per square foot up to 300 square feet — or the actual-expense method, deducting a percentage of rent, utilities, insurance, and depreciation based on the office's share of your home. "Exclusive use" is the key: the space has to be business-only.

A quick example

A 150-square-foot office under the simplified method yields a $750 deduction with almost no paperwork; the actual-expense method might yield more if your housing costs are high.

What people get wrong

This deduction is for the self-employed — W-2 employees generally can't claim it, even when working from home. And "exclusive use" really means exclusive: a kitchen table doesn't qualify.

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Frequently asked questions

What does Home Office Deduction mean?

The home office deduction lets self-employed people write off the part of their home used regularly and exclusively for business.

How does Home Office Deduction work?

You can use the simplified method — $5 per square foot up to 300 square feet — or the actual-expense method, deducting a percentage of rent, utilities, insurance, and depreciation based on the office's share of your home. "Exclusive use" is the key: the space has to be business-only.

What's the most common mistake with home office deduction?

This deduction is for the self-employed — W-2 employees generally can't claim it, even when working from home. And "exclusive use" really means exclusive: a kitchen table doesn't qualify.