Can You Deduct Your Home Office? Here's What Actually Qualifies
The home office deduction is one of the most misunderstood (and underused) tax breaks available to small business owners and the self-employed. Many people assume they don't qualify, or worse, take the deduction incorrectly and risk being flagged by the IRS.
Let's clear up the confusion. If you regularly run your business from home, even just part-time, you may be eligible to deduct a portion of your home expenses. Here's what qualifies, how to calculate your deduction, and the common pitfalls to avoid.
Illustration of a home office setup with a wooden desk, laptop, desk lamp, blue chair, and a clipboard labeled 'HOME OFFICE DEDUCTION' showing a checklist. Includes a calculator, potted plant, and a window with a house icon in the background.
What Qualifies as a Home Office?
To claim the home office deduction, the IRS requires two main things:
1. Regular and Exclusive Use
You must use a specific area of your home, both regularly and exclusively, for business purposes. That means:
The space is used consistently for work, not just occasionally.
It's used only for business purposes, not for personal tasks like laundry, watching TV, or letting the kids do their homework.
It doesn't have to be a separate room (a corner or sectioned-off space works), but it can't serve dual purposes. If it's your business space during the day and your family's playroom at night, it won't qualify.
2. Principal Place of Business
Your home office must be either:
The main location where you conduct business, or
A space where you regularly meet with clients or customers, or
A place used for administrative or management tasks (like scheduling, bookkeeping, or responding to emails), even if you do other work elsewhere.
Why It Matters: More Than Just a Tax Break
Qualifying for the home office deduction does more than reduce your taxable income; it can also make other deductions available, like:
Mileage from your home to other work locations (because now your commute is business-related!)
A portion of your utilities, insurance, internet, and even repairs
If you're using your home as a legitimate base of operations, this deduction can create a ripple effect of savings.
Ways to Calculate Your Home Office Deduction
Once you determine that your space qualifies, you have two options for calculating the deduction:
1. Simplified Method
You can deduct $5 per square foot of your home office, up to a maximum of 300 square feet.
That means the max deduction is $1,500.
No need to calculate actual expenses, just measure and multiply.
This method is easy, fast, and audit-friendly.
2. Actual Expense Method
You deduct a percentage of your actual household expenses (mortgage interest or rent, property taxes, utilities, insurance, internet, repairs, etc.).
The percentage is based on how much square footage your home office occupies.
Example:
If your home is 2,000 square feet and your home office is 200 square feet, you can deduct 10% of qualified expenses.
This method typically yields a larger deduction but requires more record-keeping.
What's Deductible (If You Use the Actual Expense Method)?
Here are some expenses you may be able to partially deduct:
Rent or mortgage interest
Homeowner's or renter's insurance
Utilities (electricity, gas, water)
Internet service
Repairs and maintenance (full deduction if for the office only; partial if for the whole house)
Depreciation (for homeowners)
Keep in mind that if you're using this method, maintaining good documentation is essential.
Common Mistakes to Avoid
Here are some of the top mistakes I see when clients come in:
Claiming a space that's used for both personal and business purposes
Using the deduction without proof of square footage or layout
Overestimating the business-use percentage
Forgetting to update the deduction when moving to a new home or changing how the space is used
Remember, the IRS doesn't expect perfection, but they do expect consistency and clarity.
How This Connects to Other Deductions
If your home office qualifies, you're also allowed to deduct:
Business mileage from your home to other locations (covered in the previous post!)
Equipment and furnishings used exclusively in that space (like desks, shelving, printers)
In many cases, documenting your home office setup can unlock bigger deductions across your entire tax picture.
Final Thoughts
If you're self-employed and working from home, even if only part-time, it's worth exploring whether your space qualifies for the home office deduction. Don't assume you don't qualify just because you don't have a separate office or because your business is part-time.
And if you've skipped the deduction in the past because it felt too complicated, it might be time to revisit it. The simplified method makes things much more accessible, and even the actual expense method can be worthwhile if your home costs are high.
Let's Make Sure You're Getting Credit for the Space You're Already Using
If you’re running your business from home, even just a few days a week, you might be leaving money on the table. The home office deduction is one of those tax breaks that sounds intimidating, but it’s completely doable with the right guidance.
At Pilot Management Group, I help small business owners figure out what qualifies, document it properly, and build systems that keep things organized all year, not just during tax season.
Want to make sure your space qualifies? Book a consultation or email me at info@pilotmg.com and let’s talk it through.