Simplified vs actual-expense method — both computed, best one flagged
| Actual method line | Total | Office share |
|---|
The home office deduction has a scary reputation and a friendly reality: if you're self-employed and a part of your home is used regularly and exclusively for business, the deduction is yours — the only real question is which of the two calculation methods pays more. This estimator runs both: the zero-paperwork simplified method ($5/sq ft) and the actual-expense method that often doubles it for renters with real costs.
| Simplified | Actual expenses | |
|---|---|---|
| Math | $5 × office sq ft (max 300 → $1,500) | (Rent/mortgage-interest + utilities + insurance + repairs) × office % |
| Records | Square footage only | Bills and receipts all year |
| Depreciation | None (no recapture at sale) | Homeowners also depreciate the office share — bigger deduction, recapture later |
| Usually wins for | Small offices, homeowners avoiding recapture | Renters in expensive cities (a 10% office share of $2,500 rent = $3,000+/yr) |
"Home office = audit" is 1990s folklore: the simplified method's existence signals IRS normalization, and millions claim it annually. What draws attention isn't the deduction — it's implausible claims (60% of a family home, losses every year). Measure honestly, photograph the space, and claim what the law gives you. The deduction also unlocks a bonus: with a qualifying home office, trips from home to clients become deductible business miles instead of commuting (see the Mileage tool).
The actual method lets homeowners depreciate the office share (~2.6%/yr of the home's building value) — real money now, but recaptured at 25% when you sell, even years later. The simplified method sidesteps recapture entirely, which is why many homeowners choose it despite smaller numbers. Renters have no such tradeoff: actual usually wins outright.
No — the W-2 home-office deduction is suspended under current law regardless of employer requirements. Ask about employer reimbursement (tax-free to you, deductible to them) instead. Self-employment income alongside the job does qualify for its share.
A clearly-defined area used exclusively for business qualifies — it needn't be a whole room. The desk-and-bookshelf zone passes if nothing personal happens there; the guest-room-slash-office fails the exclusivity test in audits.
Renters: full rent. Homeowners: mortgage INTEREST (not principal) plus property taxes — though note those may already be itemized personally; the office share moves them to Schedule C where they also reduce SE tax, which is strictly better.
Depreciation taken (or allowable) is recaptured at up to 25% at sale — the deduction is partly a deferral. The Section 121 home-sale exclusion covers the rest of the gain but never the depreciation. Simplified-method users skip this entirely.
No — it's limited to the business's net income before the deduction; excess carries forward under the actual method. A tiny side gig can't generate a big home-office loss.
Yes, year by year (homeowner depreciation adds minor complexity when toggling). Run this tool annually — rent increases and utility swings flip the winner more often than people expect.
Yes — all figures compute locally in your browser.
Measure the space once, run both methods, take the bigger number — and enjoy the quiet bonus that your 'commute' to every client just became deductible. Few deductions pay this well per minute of paperwork.