The home office deduction allows eligible taxpayers to deduct certain expenses related to using part of their home for business. However, eligibility has narrowed significantly since the Tax Cuts and Jobs Act (TCJA) of 2017.

34 steps across 12 sections

1. Measure Your Office Space

Measure the dedicated business area in square feet
Maximum allowable: 300 square feet

2. Calculate the Deduction

Multiply square footage by $5
Example: 200 sq ft x $5 = $1,000 deduction

3. Report on Schedule C

Enter the deduction on Schedule C, Line 30
No Form 8829 needed

4. Claim Remaining Deductions Separately

Mortgage interest and property taxes can still be fully deducted on Schedule A (itemized deductions)
These are not reduced by the simplified method

5. Keep Basic Records

Record of office dimensions
Photo of workspace (recommended)
Documentation that the space meets exclusive and regular use tests

6. Determine Business-Use Percentage

Area method (most common): Divide office square footage by total home square footage
Example: 250 sq ft office / 2,000 sq ft home = 12.5%
Room method (if rooms are roughly equal size): Divide number of business rooms by total rooms
Example: 1 office / 8 rooms = 12.5%

7. Categorize Expenses

Direct expenses (100% deductible): Expenses that benefit only the office space (e.g., painting the office, office-only repairs)
Indirect expenses (deductible at business-use %): Expenses that benefit the entire home (mortgage interest, utilities, insurance, general repairs)
Unrelated expenses (0% deductible): Expenses for areas unrelated to business (e.g., landscaping the backyard, painting a bedroom)

8. Complete Form 8829

Part I: Calculate business-use percentage
Part II: Calculate allowable deduction (direct + indirect expenses x %)
Part III: Calculate depreciation of the home
Part IV: Calculate carryover of unallowed expenses

9. Transfer to Schedule C

The total from Form 8829 flows to Schedule C, Line 30

10. File and Retain Records

Retain all receipts, bills, and calculations for at least 3 years (IRS statute of limitations), ideally 7 years

11. When Simplified Method Wins

Your office is 300 sq ft or less
Your actual home expenses are low (e.g., renting an inexpensive apartment)
You want minimal recordkeeping hassle
You do not want to deal with depreciation recapture when you sell your home
Your actual deduction under the regular method would be around $1,500 anyway

12. When Regular Method Wins

Your office is large (or your home is small, giving a high business-use percentage)
Your home expenses are significant (high mortgage interest, high utilities, expensive area)
Your business income fluctuates and you want to carry forward unused deductions
You are comfortable with detailed recordkeeping
The calculated deduction significantly exceeds $1,500

Home office deduction