A spare bedroom with a desk, a laptop and a stack of files looks like a home office, and for millions of people it is the place they work every day. For tax purposes it often is not. The Internal Revenue Service allows the deduction for business use of a home only to people who meet specific tests, and employees who work from home for an employer are not among them.

With the year closing and tax season ahead, here is how the IRS describes who qualifies, what counts as the office and how the two calculation methods work.

Employees cannot claim it

The IRS page on the simplified option states that taxpayers can no longer claim a deduction for a home office as an employee. The change dates to tax years beginning after 2017, when the itemized deduction for unreimbursed employee business expenses ended. A salaried worker on a hybrid schedule, or one whose employer closed the office, does not get the deduction on a federal return, however much of the house the job takes up. Some states set their own rules, so a state return can differ.

The deduction remains available to self-employed people who file Schedule C, to partners for some unreimbursed partnership expenses, and to farmers on Schedule F, according to the IRS tax topic on business use of a home.

The space has to pass two tests

The first test is regular and exclusive use. The part of the home claimed must be used regularly and only for the business. The IRS is direct about the second half of that: any part of the home used for both personal and business purposes does not qualify. A desk in the corner of a guest room that also hosts visitors, or a dining table cleared for work each morning, fails.

The second test is about the role the space plays. It qualifies if it is the principal place of business, if it is where the owner regularly meets clients or customers, or if it is a separate structure such as a detached studio used for the business. A home office used for administrative or management work can count as the principal place of business when there is no other fixed location where that work is done in substantial amounts.

Two exceptions drop the exclusive use requirement: space used to store inventory or product samples when the home is the business's only fixed location, and space used regularly to provide day care.

Method one: $5 per square foot

The simplified option, set by Revenue Procedure 2013-13, multiplies the office's square footage by $5, up to 300 square feet. The largest deduction it can produce is $1,500. There is no depreciation to track and no recapture of depreciation later when the house is sold. Mortgage interest and property taxes are not split between business and personal use under this method; anyone who itemizes claims them in full on Schedule A. The method is chosen on the Schedule C itself, with the square footage of the home and of the office.

Method two: actual expenses

The regular method, figured on Form 8829, divides the office's floor area by the home's floor area and applies that percentage to indirect costs such as mortgage interest, real estate taxes, utilities, insurance, repairs and depreciation. Costs that apply only to the office, such as painting that room, are deducted in full. The record keeping is heavier, and depreciation claimed on the office is subject to recapture when the home is sold.

Limits that apply to both

Under either method, the deduction cannot be larger than the gross income limit tied to the business use of the home. Under the regular method, expenses over that limit can carry forward to the next year. The simplified method has no carryover. A filer can switch methods from one year to the next, but the IRS says that once a method is chosen for a year on a timely filed original return, it cannot be changed for that year.

Where to read the full rules

IRS Publication 587, Business Use of Your Home, has the worksheets and the detailed tests, including how to handle a home used for part of a year and a business that moves. Tax Topic 509 is the shorter summary and was last updated by the IRS in September 2026.

This article reports rules, data and expert guidance. It is not legal, tax, insurance or financial advice. Talk to a licensed pro, your tax advisor or your insurer before you act on it.

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