Two methods, one deduction
How the home office deduction works in 2026
The IRS offers two ways to calculate the home office deduction for self-employed filers. The simplified method (Rev. Proc. 2013-13) multiplies $5 by the square footage of your dedicated office space, capped at 300 sq ft for a maximum $1,500 deduction. The regular method calculates the business-use percentage of your home and applies it to actual expenses including rent or mortgage interest, utilities, insurance, repairs and depreciation.
Self-employed only (under current law)
W-2 employees cannot claim the home office deduction on their federal return under the TCJA suspension (2018-2025). Only Schedule C filers, including freelancers, independent contractors and sole proprietors, qualify. The deduction reduces both income tax and self-employment tax by lowering your Schedule C net profit.
Questions
Home office deduction FAQ
Who qualifies for the home office deduction?
Self-employed individuals, independent contractors and freelancers who use a dedicated area of their home regularly and exclusively for business. W-2 employees working from home cannot claim the home office deduction under current federal law (the TCJA suspended it for employees from 2018 through 2025).
What is the simplified home office deduction?
The simplified method lets you deduct $5 per square foot of your home office, up to a maximum of 300 square feet, for a maximum deduction of $1,500 per year (IRS Rev. Proc. 2013-13). You do not need to track actual home expenses like utilities, insurance or depreciation.
What is the regular method for home office deduction?
The regular method calculates actual expenses: rent or mortgage interest, utilities, insurance, repairs, depreciation and other home costs, multiplied by the percentage of your home used for business. If your office is 200 sq ft in a 2,000 sq ft home, you deduct 10% of qualifying home expenses.
Can remote employees claim a home office deduction?
Generally no. The TCJA suspended the employee home office deduction for federal taxes from 2018 through 2025. Only self-employed individuals (Schedule C filers) can claim it. Some states, like California and New York, may allow state-level deductions for employees under certain conditions.
Does the home office deduction reduce self-employment tax?
Yes. The home office deduction reduces your Schedule C net profit, which directly lowers both your federal income tax and your self-employment tax (15.3% on 92.35% of net profit). A $1,500 deduction at the 22% bracket plus SE tax saves roughly $475 in total taxes.
Which method should I use -- simplified or regular?
Use simplified if your home office is small (under 300 sq ft) and you want minimal recordkeeping. Use the regular method if your actual home expenses are high or your office is large -- it can produce a bigger deduction but requires tracking expenses and calculating depreciation.
- Sources: IRS Rev. Proc. 2013-13 (simplified method $5/sq ft, max 300 sq ft) · IRS Pub. 587 (Business Use of Your Home) · TCJA Sec. 11045 (employee deduction suspension).
- 🔄 Last updated July 2026 · Tax year 2026
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