Two methods, and you pick the bigger one
If you're self-employed and use part of your home for business, you can deduct it two ways. The simplified method gives you a flat $5 per square foot on up to 300 square feet, a maximum of $1,500, with no receipts and no depreciation. The actual expense method deducts the business percentage of your real home costs: rent or mortgage interest, utilities, insurance, repairs and property tax. You can choose whichever is larger, and you can switch year to year.
The "regular and exclusive use" test
This is the rule that disqualifies most claims. The space must be used regularly and exclusively for business. A spare bedroom that's only ever an office qualifies. A dining table where you also eat dinner does not, no matter how many hours you work there. It doesn't need to be a whole room (a clearly identifiable corner is acceptable), but personal use of that area breaks the exclusivity test. It must also be your principal place of business, or a space where you regularly meet clients.
W-2 employees generally can't claim it
Worth stating plainly: since 2018 the deduction for unreimbursed employee expenses has been suspended, so remote employees working from home for an employer cannot deduct a home office on their federal return. The deduction is for the self-employed: sole proprietors, single-member LLCs, freelancers, and gig workers filing Schedule C. If you're an employee, ask about an accountable reimbursement plan instead; a few states still allow a state-level deduction.
Why it's worth more than it looks
For the self-employed, the home office deduction reduces both income tax and self-employment tax, because it lowers Schedule C profit, which is what the 15.3% SE tax is calculated on. That's why a $2,667 deduction can be worth about $800 in the 22% bracket, not $587. It's one of the highest-value deductions available to a home-based business.
Limits and record-keeping
The deduction can't create or increase a business loss. It's limited to your net business income, with the excess carried forward under the actual method. Under actual expenses you also depreciate the business portion of a home you own, which is later recaptured when you sell; the simplified method avoids that entirely, which is a genuine reason some owners choose it. Either way, keep a floor plan with measurements, photos, and your expense records. See our full 2026 deductions guide for what else you can claim.