The Home Office Deduction
Employees: Not eligible through tax year 2025 (unreimbursed employee expenses were suspended by the Tax Cuts and Jobs Act). Congress would need to act for anything to change after 2025.
Business owners (Schedule C, certain partners): You may qualify if your space meets the rules below.
What qualifies?
Exclusive & regular use: A clearly defined area used only for business (not the kitchen table or a hobby desk).
Primary place of business (or where you meet clients) or a separate free-standing structure used for business.
What expenses count?
Direct costs (100% deductible): expenses only for the office (e.g., painting that room, replacing its carpet).
Indirect costs (pro-rated): mortgage interest or rent, insurance, utilities, HOA, etc. Apply the square-footage ratio, which is equal to the square footage of your office divided by the total square footage of your house.
How to calculate (standard method)
Add direct costs (100%).
Multiply indirect costs by your office/home ratio.
Add the two amounts for your deduction.
Simplified option: Instead of actual costs, use $5 per sq ft up to 300 sq ft (max $1,500).
Income limitation
The home office deduction can’t create or increase a net loss. Any excess (if limited) can typically be carried forward.