If you are self-employed and use part of your home regularly and exclusively for business, you can deduct it. The simplified method is $5 per square foot, up to 300 square feet, for a maximum deduction of $1,500. The actual expense method can produce a larger deduction, but requires more records. W-2 employees who work remotely do not qualify.
Here is how to claim it correctly, including the single rule that disqualifies most people who try.
Who qualifies
The deduction has two tests, and you must pass both.
Regular and exclusive use. The space must be used regularly for business and exclusively for business. A spare room you use only as your office qualifies. The kitchen table, where you also eat dinner, does not. It does not have to be an entire room; a clearly defined and partitioned area can count, but the exclusive-use rule is strict, and a desk in a corner that doubles as family space typically fails it.
Principal place of business. Your home must be your main place of business, or where you regularly meet clients. Importantly, if you work at client sites but do your administrative and management work from home, your home office can still qualify as your principal place of business for those tasks.
One hard line: if you are a W-2 employee working remotely, you cannot claim this deduction under current law, even if your employer requires you to work from home. It is for the self-employed.
The two ways to calculate it
The simplified method is the easy route. Multiply your office square footage, up to a 300-square-foot cap, by $5. A 200 square foot office gives you a $1,000 deduction. The maximum is $1,500. No tracking utility bills, no depreciation, no extra form.
The actual expense method deducts the business-use percentage of your real home costs. Divide your office square footage by your home's total square footage to get your business-use percentage, then apply it to rent or mortgage interest, utilities, insurance, and repairs. If your office is 250 square feet in a 1,000-square-foot home, that is 25 percent of those costs. This method takes more recordkeeping but can produce a larger deduction, especially if your housing costs are high.
You can choose the better method each year, so it is worth running both if your office is sizable or your rent is steep.
Why this deduction is worth the effort
The home office deduction is taken on Schedule C, which means it reduces both your income tax and your self-employment tax. That second part matters: many deductions only lower income tax, but because this one comes off before self-employment tax is calculated, even the simplified method's $1,500 maximum saves roughly $500 in combined tax for many filers. For a larger office, the savings increase from there.
There is also a useful connection to vehicle costs. When your home office is your principal place of business, trips from home to client sites become deductible business mileage rather than a non-deductible commute. The home office deduction can quietly unlock your mileage deduction, too.
How Sumly fits
The home office deduction is one piece of a deduction picture that, for most independent workers, lives scattered across the year and gets assembled in a panic.
Sumly keeps the money side of your work in one place. Your expenses get organized and categorized as they happen, so when you claim the home office deduction, it sits alongside your software, mileage, and everything else as part of one running total. You are not hunting for numbers at filing time.
And because Sumly is backed by in-house licensed tax professionals, questions like whether your space passes the exclusive-use test, or whether the simplified or actual method serves you better, have real licensed professionals behind them. The tool organizes and categorizes your finances so the deductions you earn are captured and ready, and the professionals help you claim them correctly.
Frequently asked questions
Can I take the home office deduction if I rent? Yes. Renters qualify on the same terms as owners. Under the actual expense method, you deduct the business-use percentage of your rent and utilities.
Does the home office deduction trigger an audit? It is a legitimate deduction claimed by millions of self-employed people. The key is meeting the regular-and-exclusive-use test and keeping records like a square footage measurement and a photo of the space.
Can I deduct a home office if I also have an outside office? Possibly. If you do substantial administrative or management work from home, it can qualify as your principal place of business for those activities, even if you work elsewhere too.
Claim every deduction you've earned
A qualifying home office is worth real money, and the simplified method makes it nearly paperwork-free.
Start free with Sumly and keep your home office and every other deduction organized in one place all year.
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