The home office deduction is one of the most misunderstood tax breaks for self-employed Americans. The IRS requires that the space be used regularly and exclusively for business β€” meaning no personal use at all in that area.

A dedicated room with a door you close for client calls is a strong candidate. A kitchen table you also eat at is not.

Two Calculation Methods

There are two methods to calculate this deduction:

  • Simplified method: per square foot, up to 300 sq ft (maximum ,500 deduction)
  • Regular method: Actual home expenses multiplied by the percentage of your home used for business

The regular method takes more recordkeeping but often produces a larger deduction. Renters and homeowners both qualify.

Who Does NOT Qualify

W-2 employees working from home do not qualify under current law following the 2017 Tax Cuts and Jobs Act. This deduction is only available to self-employed individuals and business owners.