The home office deduction: who actually qualifies?
You can deduct a home office if you use the space regularly and exclusively for business, and it's your principal place of business. The simplified method gives you $5 per square foot, up to 300 square feet. W-2 employees can't claim it, and S-Corp owners use a reimbursement instead.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- The test. Used regularly and only for business
- Simplified. $5 a square foot, up to 300 square feet
- Not for. Employees can't claim it on their federal return
Do you qualify?
You need to pass two tests. The space has to be used regularly and exclusively for business, so a desk in the guest room doesn't work if guests use the room. And it has to be your principal place of business, or a place where you meet clients, or a separate structure used for business.
You can have another work location and still qualify, if you do your admin and management from home and have no other fixed location for it.
Which method saves more?
| Method | How it works | Best when |
|---|---|---|
| Simplified | $5 per square foot, up to 300 sq ft | Small space, little paperwork |
| Regular, Form 8829 | Business share of actual home costs | Higher housing costs, larger space |
Under the regular method, you take the business percentage of rent or mortgage interest, utilities, insurance, repairs and depreciation. For a 200-square-foot office in a 2,000-square-foot home, that's 10%. If your costs are $30,000, it's $3,000, against $1,000 with the simplified method. You can choose each year, but the regular method means tracking those bills.
What about S-Corp owners?
S-Corp owners are employees of their company, so they can't claim the deduction on Schedule E or on their personal return. The usual fix is an accountable plan, where the company reimburses you for the business share of your home costs. The company deducts it, and you don't report it as income. See how accountable plans work.
What should you watch out for?
- The deduction can't create a loss under the simplified method, and it's limited by your business income under the regular method
- Depreciation claimed under the regular method can be taxed when you sell the home
- Multi-use rooms fail the exclusive-use test
- Keep a floor plan or simple measurements with your records
It's a legitimate deduction, and you shouldn't avoid it out of fear. Just make sure the facts fit. If you've got a car used for business too, a home office can make your trips from home deductible, since you're traveling from a place of business.
Sources
- IRS: Home office deduction
- IRS Publication 587: Business use of your home
- IRS: Simplified option for home office deduction
General information, not tax advice for your situation.
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See our business tax returns serviceCan I deduct my home office if I rent?
Yes. You can deduct the business share of rent under the regular method, or use the simplified method.
Does a corner of a room count?
Yes, if that area is used only for business. It doesn't need walls, but it has to be clearly set apart.
Can W-2 remote workers take the home office deduction?
No, not on a federal return. A few states have their own rules.
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