The home office deduction allows self-employed taxpayers to deduct the costs of the portion of their home used regularly and exclusively for business, when that space is the principal place of business or is used to meet clients. "Exclusive use" is strict: a dedicated room or clearly defined area used only for the business. Qualifying administrative use counts, so a contractor who does all invoicing and scheduling from a home desk qualifies even though the actual work happens elsewhere. Two methods exist: the simplified method ($5 per square foot, capped at 300 square feet, so up to $1,500) and the actual-expense method (the business-use percentage of rent or depreciation, utilities, insurance, and repairs). W-2 employees cannot claim it, but S corporation owner-employees can capture the same economics through an accountable plan reimbursement.
Home Office Deduction
Primary authority: IRC §280A(c)
The authority behind it
IRC §280A(c)
Every entry in this glossary cites the statute, regulation, or IRS guidance behind it.
Worked example
A therapist uses a 240 square foot room, 10% of her apartment, solely for sessions and admin. With $30,000 of annual rent and utilities, the actual method yields a $3,000 deduction versus $1,200 under the simplified method, so she uses actual expenses.
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