Home Office Tax Deduction 2026

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The home office tax deduction can significantly reduce your tax bill in 2026 if you run a business from home.

Working from home is now the norm for freelancers, consultants, side hustlers, and many small business owners.

However, working from home also means higher bills, including electricity, internet, rent, and the wear and tear on your office space and equipment.

If you’re self-employed and meet the IRS rules, you may be able to deduct part of those costs as a home office deduction.

This article will provide details on the following:

Who qualifies for the home office tax deduction?
What qualifies as a home office?
How to calculate home office deduction (simplified vs. regular method)
What expenses are deductible for home office?

Let’s dive into the details.

Who qualifies for the home office tax deduction?

The “Gig economy” worker, Freelancer, Independent contractor, or the Self-employed (including single-member LLCs taxed on Schedule C) who uses part of their home regularly and exclusively for trade or business.

Your “home” can be:

– A house or apartment
– A condo or mobile home
– A boat
– An unattached structure like a garage, studio, barn, or greenhouse

Regular W-2 employees who work remotely or under a hybrid policy cannot claim a home office deduction on their personal returns.

Before 2018, some employees could deduct unreimbursed business expenses (including home office) as miscellaneous itemized deductions.

The Tax Cuts and Jobs Act (TCJA) suspended those deductions starting in 2018, and the One Big Beautiful Bill Act (OBBBA) has now effectively made that suspension permanent for unreimbursed employee expenses.

Even in 2026, the home office deduction remains a break available only to self-employed individuals.

If you have both a W-2 job and a side business, you may still be able to claim a home office deduction for the business, as long as the space meets the usual tests and you report the income and expenses on Schedule C.

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What qualifies as a home office?

A home office is any part of your home that you use regularly and exclusively for your business.

The IRS definition of “home” includes:

– House, apartment, condominium, mobile home, or boat
– Structures on the property: unattached garage, studio, barn, greenhouse, etc.

It does not include any part of your property used exclusively as a hotel, motel, or similar business.

To qualify, your use of the space must meet at least one of the IRS tests for business use of home:

1. It’s used regularly and exclusively as your principal place of business.
2. It’s used regularly and exclusively to meet or deal with patients, clients, or customers in the normal course of your business.
3. It’s a separate structure not attached to your home that you use regularly and exclusively for business.
4. You regularly use the space to store inventory or product samples (special rules apply; the exclusive-use test is relaxed here).
5. You use the property for rental purposes.
6. You operate a daycare facility in the home (again, special rules apply).

Exclusive use means the space is only used for business. A room that doubles as a guest bedroom or family dining area generally does not qualify, unless you fall into a specific exception (such as childcare or inventory storage).

Check out: The 2026 Income Tax Brackets for Individuals and Married Couples.

How To Calculate Home Office Deduction

There are two options to calculate the home office deductions:

– Simplified method
– Regular method

You can choose the method for each home each year, but there are rules to follow if you switch back and forth.

Simplified Method

The simplified method is easier and doesn’t require detailed tracking of home expenses.

For 2026, the IRS still allows:

– A standard deduction of $5 per square foot of home office space
– Up to 300 square feet
– Maximum home office deduction under this method: $1,500 per year

Example:

If your home office is 100 square feet, your home office deduction using the simplified method is:

100 sq. ft. × $5 = $500

Key rules:

– The area must be used regularly and exclusively for business.
– The deduction cannot exceed your gross income from the business use of the home (after other business expenses).
– You cannot deduct depreciation of your home in a year you use the simplified method.

Regular Method

The regular method requires more record-keeping but may produce a larger deduction, especially if your home costs are high.

1. Figure the business-use percentage

Divide the square footage of your office by the total finished area of your home.

Example:

200 sq. ft. office in a 2,000 sq. ft. home:

200 ÷ 2,000 = 10% business use

2. Apply that percentage to your indirect expenses

Indirect expenses are those that benefit the entire home, such as:

– Mortgage interest or rent
– Utilities (electricity, gas, water)
– Homeowners insurance
– Real estate taxes
– General repairs and maintenance

With a 10% business-use percentage, 10% of those indirect costs become deductible as home office expenses.

3. Add direct expenses in full

Direct expenses relate only to the office space itself (for example, repainting or repairing just the office). These are generally 100% deductible under the regular method.

Example table (10% business use):

Expense	Annual Cost	Business %	Deductible Amount
Mortgage interest	$1,500	10%	$150
Insurance	$500	10%	$50
Utilities	$1,300	10%	$130
Property taxes	$1,000	10%	$100
General repairs	$400	10%	$40
Total			$470

You may also:

– Deduct depreciation on the business portion of your home
– Carry forward unused home office expenses to a future year if the gross-income test limits you

To claim the regular method, you typically use Form 8829 (Expenses for Business Use of Your Home), which is attached to Schedule C.

Simplified vs. Regular method

	Simplified Method	Regular Method
Eligibility	Must use a portion of your home regularly and exclusively for business	Same
Size limit	Up to 300 sq. ft. of business use	No fixed sq. ft. limit; based on % of home
Calculation	$5 × allowable square footage (max $1,500)	Actual expenses × business-use percentage
Home itemized deductions	Claimed in full on Schedule A (mortgage interest, real estate taxes, etc.)	Allocated between Schedule A and Schedule C/F
Depreciation	No depreciation deduction	Depreciation allowed on business portion
Depreciation recapture on sale	No recapture for simplified-method years	Depreciation allowed on the business portion
Gross-income limit	Deduction cannot exceed gross income from business use of home	Same
Carryovers	No carryover of unused home office expenses	Unused home office expenses may carry forward

What expenses are deductible for home office?

Under the regular method, expenses fall into two broad categories:

Indirect expenses (partially deductible)

These benefit the entire home. You deduct only the business-use percentage:

– Mortgage interest or rent
– Homeowners or renters insurance
– Utilities (electricity, gas, water, trash)
– Real estate taxes
– General repairs and maintenance
– Depreciation (business portion of the home)

Direct expenses (fully deductible for the office portion)

These relate only to the office area:

– Repainting or repairing just the office
– Cleaning services that only cover the office
– Office-specific improvements

Other business expenses used in the home (but not part of your house itself) can also be deductible, such as:

– Business-use share of the internet and phone
– Office furniture (desk, chair, shelves)
– Computer, printer, and other office equipment
– Software and cloud tools used in your business

Some of these items (furniture, computers, equipment) are technically business assets, which may be depreciated or fully expensed under current expensing rules, rather than treated as “home office” expenses.

In practice, most small businesses can still recover the full cost quickly, but your accountant can help choose the best approach for 2026.

Read details about Form 1099-NEC for Independent Contractors

Final thoughts

The home office deduction remains a valuable tax break in 2026 for self-employed people, freelancers, and small business owners who genuinely run their business from home.

Key takeaways:

Employees (W-2) still cannot claim a home office deduction in 2026.
You must use the space regularly and exclusively for business, and it must meet at least one of the IRS tests for business use of home.
The simplified method is more straightforward (up to $1,500 per year), while the regular method requires more work but may result in a larger deduction.
Good records, such as floor plans, photos, receipts, and clear logs, help you substantiate your claim if the IRS ever asks questions.

If you’re unsure which method yields the best result or how to classify specific expenses, it’s smart to speak with a tax professional and use tools like Akaunting to track your income and expenses cleanly throughout the year.

The better your records, the easier it is to maximize the deductions you’re legally entitled to.

Get Started with Akaunting for FREE

Frequently Asked Questions

Can I write off my Internet bill if I work from home?

If an Internet connection is necessary to make money for your business, it is a direct expense and is deductible on your 1040 tax return documents.

Can I claim expenses without receipts?

You should always keep a record of your business expenses, whether it be an invoice or payment receipt. If you do not have a receipt, ensure that you have detailed notes about the transaction.

How do I prove my home office is tax deductible?

Keep documents or receipts showing your mortgage interest, property taxes, utilities, and purchases. Expenses on office tools, such as a computer, tables, chairs, or bookshelves, are 100 percent deductible.

What happens if you get audited and don’t have receipts?

If you get audited and don’t have any proof of expenses, the Internal Revenue Service may disallow your deductions. This often leads to gross income deductions from the IRS before calculating your tax bracket.

What is “exclusive use”?

This means you must use a portion of your home exclusively and regularly for your business.