Home Office Deduction Calculator (2026)

How to use this home office deduction calculator

1. Enter the square footage of the space you use regularly and exclusively for work, and the total square footage of your home. The ratio between them is what the actual method apportions everything by.
2. Say whether you own or rent. Renters have no depreciation to claim, which also means nothing to recapture later — the comparison is simpler and the decision easier.
3. Enter your household running costs for the year: mortgage interest and property tax if you own, rent if you do not, plus utilities, home insurance and general upkeep. Whole-home figures — the calculator takes the business share.
4. Put anything spent on the office alone in the office-only box. Painting that room, a dedicated phone line, shelving that lives in there. Those are deducted in full rather than apportioned.
5. Read both columns. The highlighted one is larger, but larger is not automatically better if it comes with depreciation you will pay back later.

Two methods, and the catch in the bigger one

The simplified method is arithmetic: $5 per square foot of office space, capped at 300 square feet, so a maximum of $1,500. No receipts, no apportionment, no depreciation schedule. You write one number on Schedule C and you are done. For a small office in a modest home it often lands close to what the actual method would give, at a fraction of the effort.

The actual expense method takes the business-use percentage of your home and applies it to everything the house costs to run — mortgage interest, property tax, rent, utilities, insurance, general repairs — then adds anything spent on the office alone in full, then adds depreciation on the business share of the building. It is almost always larger, particularly for homeowners, and particularly where housing costs are high.

Depreciation is where the two methods genuinely diverge, and it is the part that gets skipped. The business share of your home's cost basis is written off straight-line over 39 years. That is a real deduction every year you claim it. But when you sell, the total depreciation you claimed — the IRS says "allowed or allowable" — is unrecaptured Section 1250 gain. It is taxed at up to 25%, and crucially it cannot be sheltered by the exclusion that normally makes a main-home sale tax-free. The simplified method includes no depreciation, so it creates no recapture at all.

Whichever method you use, the home office deduction is a Schedule C business expense, not an itemised personal deduction. That distinction is worth more than most people realise: it reduces the profit that self-employment tax is charged on as well as the profit income tax is charged on. For a sole proprietor that means the deduction is worth roughly your income tax bracket plus around fourteen points, not just the bracket.

The eligibility test is stricter than the arithmetic. The space must be used regularly and exclusively for business, and it must be your principal place of business or a place you meet clients. Exclusively means exclusively — a desk in the corner of a bedroom that is also a bedroom does not qualify, and a dining table does not become an office because a laptop sits on it. Employees cannot claim this at all; it is for the self-employed.

Example

A freelance illustrator owns a 1,500 square foot house and works from a 180 square foot spare room used only for work. Over the year the house costs $14,800 in mortgage interest, $4,200 in property tax, $3,600 in utilities, $1,450 in home insurance and $1,100 in general repairs. She spent $320 repainting the office itself. The building's cost basis, excluding land, is $310,000. Her business profit before this deduction is $82,000 and she files as single.

Actual method: $4,291.85 against $900.00 simplified — $3,391.85 more deduction.

The actual method wins by a wide margin here, as it usually does for a homeowner. It saves her about $989.33 in federal tax against roughly $207.45 from the simplified method — a difference of around $782 for the work of keeping receipts and filling in Form 8829.

Note how much the deduction is worth relative to its size: $989.33 of tax on $4,291.85 of deduction is about 23%, well above her 22% income tax bracket. That is because the deduction comes off business profit, so it reduces self-employment tax as well. The QBI deduction pulls in the other direction — it shrinks as profit shrinks — which is why the figure is 23% rather than the 36% you might expect from stacking 22% and 14.1%.

Now the part the comparison usually stops before. Ten years of claiming $953.85 in depreciation builds up $9,538.50. When she sells, that $9,538.50 is taxed at up to 25% — about $2,384.63 — and the main-home exclusion cannot absorb it. Over the same ten years the depreciation deductions save her roughly $2,199 in tax.

So the depreciation component is close to a wash, and the direction depends on facts she does not know yet: her tax position in the year she sells, and what having the money a decade earlier was worth to her. It is not a reason to avoid the actual method — the other $3,338 of deduction is unambiguously good — but it is a reason to know what you are signing up for rather than discovering it at closing.

Strip the depreciation out and the actual method still gives $3,338.00 — which is what a renter with the same housing costs would see. Renters get a simpler version of this decision entirely: no depreciation, no recapture, and in expensive rental markets the actual method still clears the $1,500 simplified cap without difficulty.

Limits and things to watch for

• Federal only. Most states follow the federal treatment for the deduction itself, but a few decouple, and state treatment of the gain on sale varies.
• The deduction cannot create or increase a business loss. Under the actual method, expenses beyond your profit carry forward to a future year; under the simplified method, they are simply lost.
• Depreciation here is straight-line over 39 years on the business share of the building. The first and last years use a mid-month convention that produces a slightly smaller figure, and land is never depreciated — enter the building portion of your basis only.
• It assumes the space qualifies. Regular and exclusive business use is a factual test, and a room that doubles as a guest bedroom does not meet it regardless of how the arithmetic looks.
• Employees cannot claim a home office deduction, even working from home full time. This is for self-employed people filing a Schedule C.
• It does not model the sale itself — the recapture figure is an illustration at the maximum rate, not a prediction of your tax on disposal.

Disclaimer. This calculator is general information, not tax advice. It uses published IRS rules for tax year 2026 and models the ordinary Schedule C case. Eligibility, depreciation and the treatment of gain on sale depend on your circumstances. Confirm with a qualified accountant, and check the sources below if the last-updated date is old.

Frequently asked questions

Which method should I choose?

Run both, which is what this page is for. As a rule the simplified method suits renters with small offices and anyone who does not want the record-keeping; the actual method suits homeowners, larger offices and expensive housing. You may switch from year to year, so the choice is not permanent — though depreciation you have already claimed stays claimed.

Does the home office deduction trigger an audit?

This belief is largely folklore left over from decades ago. It is a standard deduction claimed by a very large number of sole proprietors, and the simplified method exists precisely because the IRS wanted to reduce the burden of claiming it. What does attract attention is a claim that fails the exclusivity test or a business-use percentage that is implausible for the property.

What is depreciation recapture, in plain terms?

Every dollar of depreciation you claim reduces your home's tax basis. When you sell, a lower basis means a larger gain, and the portion of that gain equal to your claimed depreciation is taxed at up to 25% rather than at the usual capital gains rates — and it cannot be covered by the exclusion that normally makes a main-home sale tax-free. In effect you borrowed a deduction and repay it on sale.

Can I skip depreciation to avoid the recapture?

No, and this is the trap. Recapture applies to depreciation "allowed or allowable" — meaning if you used the actual expense method and could have claimed it, you are taxed as though you did, whether or not you actually took it. Not claiming it gives you the liability without the benefit. If you want to avoid recapture, use the simplified method, which has no depreciation component at all.

Does a garage, shed or garden studio count?

Yes, if it is used regularly and exclusively for business. A separate structure is actually treated more generously than a room in the house: it does not have to be your principal place of business, only used in connection with it. Include its square footage and its share of running costs.

I moved house partway through the year. Now what?

Calculate each home separately for the months you were in it and add them together. The simplified method has an average-monthly-square-footage rule for exactly this situation; the actual method simply apportions each set of expenses across the period they relate to.

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