Calculate home office and home-based business tax deductions. Compare simplified vs regular method. Free calculator. Not tax advice.
Home-based businesses can deduct a significant portion of housing costs — mortgage interest, rent, utilities, insurance, and repairs proportional to your office space. The IRS offers two methods: the simplified method ($5 per square foot up to 300 sq ft) or the regular method (actual expenses × office percentage). Our calculator shows which method saves you more.
Simplified method: $5 per square foot of dedicated office space. Maximum 300 square feet = maximum $1,500 deduction. No depreciation recapture when you sell home. Best for small offices in high-value homes. Regular method: office percentage of home times actual home expenses. Higher deduction for larger offices or high actual costs. Requires depreciation that triggers recapture at sale. Best for large home offices in average-cost areas.
Home business deductions beyond home office: Business equipment (computers, phones, cameras): 100% deductible. Business software and subscriptions: 100% deductible. Business phone line: business portion deductible. Business internet: business portion deductible. Business mileage at $0.67/mile in 2026. Business meals at 50%. Health insurance premiums for self-employed: 100% deductible from income (not SE tax). Retirement contributions: SEP-IRA up to 25% of net earnings.
IRS requires two conditions: Regular and exclusive use — the space must be used regularly and exclusively for business, not also for personal activities. Principal place of business — must be where you primarily conduct business or meet clients. A dedicated room used only for business: qualifies. A kitchen table used for both meals and work: does not qualify. The exclusive use requirement is strict — IRS audits this aggressively.
Simplified method: $5 × office square footage (max $1,500). Regular method example: $2,500/month rent or mortgage interest + utilities, office is 15% of home area: $2,500 × 12 × 15% = $4,500 annual deduction. At 22% federal tax rate: saves $990/year. At 32% plus state tax: saves $1,800+/year. Worth tracking carefully for the deduction — keep records of all home expenses.
Historically yes — home office deductions were a known audit trigger. However IRS data shows home office audits have declined as remote work has normalized. The key is legitimacy: exclusive and regular use, accurate square footage, and documented actual expenses. Using the simplified method ($5/sq ft) is less risky than regular method because it requires less documentation and no depreciation.
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