Home Office Deduction Calculator: Simplified vs. Regular Method (2026)
If you’re self-employed and use part of your home regularly and only for business, you can deduct it. Enter your space and yearly home costs to see which IRS method gives you the bigger deduction.
Estimates for education only, not tax, legal, or insurance advice.
How the home office deduction works
If you run a business from home, part of your rent or mortgage, utilities and insurance can become a business deduction. You claim it on Schedule C if you’re self-employed. W-2 employees who work from home can’t take it on their federal return.
Do you qualify?
- Regular and exclusive use: the space must be used for business on a regular basis and for nothing else. A spare room that’s only an office qualifies. The dining table you also eat at doesn’t.
- Principal place of business: it’s where you do your administrative or management work and there’s no other fixed place where you do that work. A space where you regularly meet clients, or a separate structure used for business, can also qualify.
Simplified method
Multiply the office’s square footage, up to 300 square feet, by $5. The most you can claim is $1,500. There’s no depreciation and no need to track home expenses. Mortgage interest and property taxes stay fully deductible on Schedule A if you itemize.
Regular method
Figure the business percentage of your home (office square feet ÷ total square feet). Apply it to indirect costs like rent, mortgage interest, property taxes, insurance, utilities and repairs, then add 100% of direct costs for the office itself. Owners also depreciate the business share of the building over 39 years. That means a bit more recordkeeping, and when you sell, the depreciation can be taxed (recaptured). Expenses above your business income can carry forward to next year, which isn’t allowed under the simplified method.
Which method wins?
Renters with a dedicated room and high rent often come out ahead with the regular method. Owners with a small office, a low mortgage balance or little appetite for paperwork often prefer the simplified method. You can switch methods from year to year, but you choose on your original, on-time return for that year and can’t change it later for that year.
Connecticut
Connecticut income tax starts from your federal adjusted gross income, so a home office deduction on your federal Schedule C also lowers your Connecticut taxable income.
Frequently asked questions
What is the maximum simplified home office deduction?
$1,500 a year: $5 per square foot for up to 300 square feet of space used regularly and exclusively for business.
Can I take the home office deduction if I’m a W-2 employee working remotely?
Not on your federal return. Unreimbursed employee expenses, including a home office, are not deductible federally. The deduction is for self-employed people and business owners.
Does the home office deduction lower self-employment tax too?
Yes. It reduces your Schedule C net profit, which lowers both income tax and self-employment tax.
Is there a catch with the regular method?
Owners depreciate the business part of the home, and that depreciation can be taxed when you sell. You also need records for every expense. The deduction can’t create a business loss, but any excess carries forward.
Can I switch between methods?
Yes, you can choose either method each year on your original, timely filed return. If you go back to the regular method after using the simplified one, depreciation is figured using the IRS optional tables.
Sources and assumptions (updated Oct 2026)
- IRS, Simplified option for home office deduction (reviewed Mar 2026): $5 per square foot, maximum 300 square feet; no depreciation; deduction can’t exceed gross income from business use less business expenses; no carryover under the simplified method; carryover allowed under the regular method.
- IRS Publication 587, Business Use of Your Home: qualification tests, business percentage, direct vs. indirect expenses, depreciation of the business part of a home as nonresidential real property over 39 years.
- Simplifications: depreciation is shown as a full year (basis × business % ÷ 39, which matches the 2.564% IRS table rate for years after the first). The first year uses a smaller mid-month rate. The income limit is applied to the total; Form 8829 applies it in a set order, with mortgage interest and taxes first and depreciation last. Partial-year use and casualty losses aren’t modeled.
- Under the simplified method, mortgage interest and property taxes stay fully on Schedule A (if you itemize). Under the regular method the business share moves to the business return, so the regular method’s true gain can be smaller than the difference shown.
Estimates for education only, not tax, legal, or insurance advice.
Questions about your numbers? Talk them through with a Danbury tax preparer, free for 15 minutes.