Home Office Deduction Calculator
Compare the simplified $5-per-square-foot method against your actual home costs and take the larger home-office deduction.
Written by Dorothy Ibrahim, 10+ years in banking & finance
Reviewed by Benton Jona, EA (Enrolled Agent) — 2026-07-13
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How we calculate this
This calculator computes the home office deduction both ways — the simplified method ($5 per square foot up to 300 sq ft, a $1,500 maximum, per IRS Rev. Proc. 2013-13) and the actual-expense method (your office's share of rent or mortgage interest, utilities, insurance, repairs, and property tax) — and shows which one deducts more. Either way, the IRS requires the space to be used regularly and exclusively for business: a dedicated room qualifies; the kitchen table does not.
The formulas
- Simplified method
- $5 × min(office square footage, 300)Caps at $1,500 (300 sq ft). No depreciation, no expense records required.
- Business-use percentage
- office square footage ÷ total home square footage
- Actual-expense method
- (rent or mortgage interest + utilities + insurance + repairs + property tax) × business-use percentageHomeowners also depreciate the office share of the home under this method — which triggers recapture at sale.
- Winner and tax savings
- the larger deduction; tax savings = winning deduction × your marginal rate
Worked example
- Take the defaults: a 200 sq ft office in a 2,000 sq ft home, with $24,000/yr rent, $3,600 utilities, $1,200 insurance, and $500 repairs, at a 30% marginal rate.
- Simplified = $5 × 200 = $1,000.
- Business-use percentage = 200 ÷ 2,000 = 10%. Actual expenses total $29,300, so the actual method deducts 10% × $29,300 = $2,930.
- Actual wins by $1,930 — worth about $879 in tax at a 30% marginal rate. As a rule of thumb, actual tends to win in high-rent areas or for larger offices, since the simplified method never exceeds $1,500.
Rates, benchmarks & sources
- The simplified method: $5 per square foot, 300 sq ft maximum, $1,500 cap — IRS Rev. Proc. 2013-13
- The regular-and-exclusive-use requirement, the actual-expense allocation method, and the depreciation/recapture treatment for homeowners — IRS Pub 587 (Business Use of Your Home)
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- Federal only — state treatment of the deduction varies, and the result is a planning estimate, not filing advice.
- The actual-method figure here excludes home depreciation: homeowners using the actual method also depreciate the office share of the home's basis, which increases the deduction but is recaptured as taxable income when the home sells. The simplified method avoids recapture entirely.
- The deduction (either method) generally cannot exceed the income from the business use of the home — the gross-income limitation and its carryover are not modeled.
- W-2 employees cannot take this deduction for employer work under current law — it applies to self-employment and business use.
- The tool assumes your space passes the regular-and-exclusive test; it cannot verify that, and mixed-use spaces generally fail it.
Frequently asked questions
What does "regularly and exclusively" actually require?
The space must be used for business on a continuing basis (regular) and for nothing else (exclusive). A dedicated room or a clearly separated area qualifies; a desk in the guest room where visitors sleep, or a kitchen table used for meals, fails the exclusive test. The space must also generally be your principal place of business or where you meet clients — administrative work from home usually satisfies this for self-employed owners.
Which method should I look at first — simplified or actual?
The tool computes both, and the pattern is consistent: the simplified method's $1,500 ceiling means actual usually wins for offices over roughly 300 sq ft or in high-cost housing, while simplified wins for small offices in inexpensive homes — and it requires no expense records or depreciation tracking. Homeowners weigh one more factor: actual-method depreciation is recaptured at sale, and simplified avoids that entirely.
What is the depreciation-recapture catch for homeowners?
Under the actual method a homeowner depreciates the office's share of the home's basis each year. When the home sells, that accumulated depreciation is "recaptured" — taxed as income even if the overall gain would otherwise be excluded under the home-sale exclusion. The simplified method takes no depreciation, so there is nothing to recapture, which is part of its appeal despite the $1,500 cap.
I rent — can I still take a home office deduction?
Yes, and it is often more valuable for renters: under the actual method the business-use percentage applies to your full rent plus utilities and renter's insurance, with no depreciation-recapture complication at all. In the default example, 10% of $29,300 in annual costs yields a $2,930 deduction — nearly triple the simplified method — which is typical in higher-rent markets.
Does this deduction cover my state taxes too, and is it audit bait?
This tool estimates the federal deduction only — state conformity varies — and it is not filing advice. On audit risk: the home office deduction is legitimate and widely used; what draws problems is claiming space that is not exclusively business-use or percentages far out of line with the home's size. Measured square footage, photos, and expense records make it a well-supported deduction.
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Federal figures only unless noted. State taxes vary.