IRC §280A(c)
Home Office Deduction
If part of your home is used exclusively and regularly for business, you can deduct a proportional share of rent, utilities, insurance, and repairs. There are two methods: simplified ($5/sqft, max 300 sqft, no depreciation) and actual expense (proportional share of all costs including depreciation).
The actual method produces larger deductions but carries one meaningful risk for homeowners: the depreciation component is subject to 25% recapture tax when you sell the home, even if you exclude the rest of the gain under the primary residence exclusion. The simplified method has zero recapture risk. Your CPA should model both over your expected hold period.
Who this may apply to
- Use space exclusively for business
- Use it regularly (not occasionally)
- It's your principal place of business OR where you meet clients
- Self-employed or remote employee (different rules apply)
Strategy connections
Works well with
- Accountable Plan: An employee-owner may be reimbursed for substantiated business use under a compliant plan.
- Business Vehicle Acquisition Strategy: A qualifying principal place of business can affect the treatment of trips to other work locations.
What could block this
- The space is not used regularly and exclusively for business
- The home is not the principal place of business under the applicable test
- The expense is an unreimbursed employee expense that is not currently deductible
Important considerations
- Exclusive use is a strict test — if your ‘office’ is also the guest bedroom or shared family computer area, you don’t qualify
- Employees working from home can no longer claim the home office deduction after the 2017 tax law change — this is only available to self-employed individuals and business owners
- The home office deduction cannot create a loss from the business — it’s limited to your business net income (excess carries forward)
- Claiming a home office as a homeowner and later selling can trigger partial depreciation recapture
Professional support
Tax Preparer
Will calculate your home office deduction using simplified or actual expense method, ensuring IRS compliance.
Timing
The home office must be established during the tax year. You can claim it on your return — there’s no advance filing required. For S-Corps, set up the accountable plan reimbursement before year-end.
Official sources
Reviewed 2026-07-24