The Home Office Tax Deduction

Running a business from home can help you lower your income tax bill.

By , J.D. New York University School of Law
Updated 7/10/2025

When you use part of your home for business, you might be able to deduct expenses for what the IRS calls the "business use of your home." If you meet the technical requirements of the tax law, you should be able to deduct a percentage of many of the costs of running your home, such as utilities, rent, insurance, depreciation, mortgage interest, real estate taxes, and some casualty losses, repairs, and improvements (if they relate to the part of the house you use for business).

How the Home Office Tax Deduction Works

The home office deduction is available to renters and homeowners alike. It is available for office space and other areas you use for business in your home, such as a studio, workshop, or garage. And according to the IRS, your "home" can be a house, condo, apartment unit, or even a mobile home or boat, as long as you can cook and sleep there.

However, you must meet two tax law requirements to qualify for the home office deduction.

Requirement #1: Regular and Exclusive Use

You must regularly use part of your home exclusively for a trade or business.

Requirement #2: Principal Place of Business

If you get past this first hurdle, then you must also meet any one of the following requirements:

  • Your home office is your principal place of business.
  • You regularly and exclusively use your home office for administrative or management activities for your business and have no other fixed location where you perform such activities.
  • You meet clients or customers at home.
  • You use a separate structure on your property exclusively for business purposes.
  • You store inventory or product samples at home.
  • You run a day care center at home.

Regular and Exclusive Use

To take deductions for home-related expenses, you must regularly use part of your home exclusively for your trade or business.

Regular Use

The IRS doesn't offer a clear definition of regular use, only that you must use a part of your home for business on a continuing basis, not just for occasional or incidental business. You can probably meet this test by working a couple of days a week from home, or a few hours each day.

Exclusive Use

Exclusive use means that you use a portion of your home only for business. If you use a room of your home for your business and also for personal purposes, you don't meet the exclusive use test. However, you can set aside a portion of a larger room to be used only for business, as long as your personal activities don't stray into it.

There are two exceptions to the exclusive use rule: You don't have to meet the exclusive use test if you use part of your home to store inventory or product samples, or if you run a qualified daycare facility at your home. (The storage exception is discussed just below. For the daycare rules, check IRS Publication 587, Business Use of Your Home, at www.irs.gov.)

Storing Inventory or Product Samples at Home

If you store inventory or samples at home, you can deduct expenses for the business use of your home, whether or not you use the storage space exclusively for business.

There are two limitations, however: First, you won't qualify for the deduction if you have an office or other business location outside of your home. Second, you have to store the products in a particular place, such as your garage, a closet, or a bedroom. It's okay to use the storage space for other purposes as well, as long as you regularly use it for storing inventory or samples.

You Must Be Running a Bona Fide Business

Finally, the home office deduction is available only if you are running a bona fide business. If the IRS decides that you are indulging a hobby rather than trying to earn a profit, it won't let you take the home office deduction.

Calculating the Home Office Deduction

To calculate your home office deduction, you need to determine what percentage of your home you use for business. The law says you can use "any reasonable method" to do this, such as the square footage method or the room method.

Square Footage Method

The most exact way to measure your office space is to divide the square footage of your home office by the total square footage of your home. For example, if your home is 1,600 square feet and you have a 400-square-foot home office, 25% of the total area is used for business. You need to know the square footage of your entire home and your office to make this calculation. You might be able to find this information in your real estate documents or plans. You can also measure your home yourself.

You're allowed to subtract the square footage of common areas, including hallways, entries, stairs, and landings, from the total area that you're measuring. You can also exclude attics and garages from your total space if you don't use them for business purposes.

Room Method

Another way to measure is the "room method." You can use this method only if all of the rooms in your home are about the same size. With this method, you divide the number of rooms used for business by the total number of rooms in the home. You don't include bathrooms, closets, or other storage areas. You can also omit garages and attics if you don't use them for business. For example, if you use one room in a five-room house for business, your office takes up 20% of your home.

You usually get a larger deduction with the room method.

Simplified Method

You can also use a simplified process to determine the amount of your home office deduction. However, the maximum deduction under the simplified method is $1,500.

Ordinary Business Expenses Are Deductible Even If You Don't Qualify for the Home Office Deduction

If you don't meet the rules above, you can still deduct ordinary and necessary business expenses that you incur at home, such as the cost of office supplies and equipment. The above IRS rules apply only to the expenses of actually running and maintaining your home, such as utilities, rent, depreciation, home insurance, mortgage interest, real estate taxes, and repairs.

Can Employees Qualify for the Home Office Deduction?

Before 2018, employees could claim a home office deduction if they met the requirements and had a home office for the convenience of their employer. However, the One Big Beautiful Bill Act in 2025 permanently eliminated this deduction.

Getting Help With Tax Deductions

Hiring the right tax professional is important because getting good tax help can translate into more money in your pocket. To learn more about tax deductions, talk to a tax lawyer or another tax adviser.

Further Reading
Deducting Computers Bought for Work
The Simplified Home Office Deduction
How a Small Apartment Can Qualify for Home Office Deduction

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