2026 Home Office Deduction Calculator
Run the simplified method and the actual expense method side by side, then see what the winner is actually worth once self-employment tax is counted. Most calculators price a deduction at your income tax rate alone and understate it by a third.
Simplified vs actual expense comparison
Bound to the $5 per square foot simplified rate and the 2026 IRS bracketsWhich method wins, and why the answer is rarely close
There are two ways to deduct a home office, and they are not two roads to the same number. The simplified method pays a flat rate for every square foot of qualifying space. The actual expense method gives you the same percentage of your real housing costs as the office occupies of your home. Which one wins depends almost entirely on one thing: how much your home costs per square foot per year.
If your annual housing costs work out to more than the flat rate per square foot, the actual method wins and it is usually not close. If your home is cheap to run relative to its floor area — a paid-off mortgage is the classic case — the simplified method can beat it while asking for almost no records. The calculator above settles it on your own numbers.
What each field means
Office area
The floor area you use regularly and exclusively for business. The IRS is strict about the word exclusively: you fail the test "if you use the area in question both for business and for personal purposes" (IRS Publication 587).
Total home area
The full finished floor area of your home. Office area divided by this figure gives your business-use share, which is the multiplier the actual expense method applies to every indirect cost.
Net business profit
Schedule C profit after every other business expense. It matters twice: it caps the deduction under the gross income limitation, and it sets the tax bracket that decides what the deduction is worth.
Indirect home costs
Rent or mortgage interest, utilities, homeowners insurance, repairs and property tax — costs that keep the whole house running. Only your business-use share of these is deductible.
Direct office-only expenses
Costs that benefit the office and nothing else, such as repainting that room. These are deductible in full rather than by percentage, which is why they sit in their own field.
The formulas
The simplified method is fixed by Revenue Procedure 2013-13: $5 per square foot of qualifying space, up to 300 square feet, which caps the deduction at $1,500. The actual method has no cap other than your profit.
1. Business-Use Share = Office Area / Total Home Area
2. Simplified Deduction = min(Office Area, 300 square feet) × $5 per square foot
3. Actual Deduction = Direct Expenses + (Indirect Home Costs × Business-Use Share)
4. Gross Income Limit = Net Business Profit before the home office deduction
5. Allowed Deduction = min(Chosen Method, Gross Income Limit)
6. SE Tax Saved = SE tax on profit − SE tax on (profit − deduction)
7. Income Tax Saved = income tax before − income tax after, allowing for the
half-SE-tax deduction moving with it
8. Total Saved = SE Tax Saved + Income Tax Saved Why a home office deduction is worth more than your tax bracket
This is the part most home office calculators get wrong. A home office deduction sits on Schedule C, so it reduces your net business profit — and net profit is the figure both self-employment tax and income tax are built on. Take the deduction and you cut both.
Self-employment tax runs at 15.3% on 92.35% of net earnings (IRS), which is roughly fourteen cents of every deducted dollar before income tax enters the picture at all. Add a middle income tax bracket on top and a deduction is worth around a third of its face value, not the fifth or the quarter a bracket-only estimate suggests. The calculator computes this properly by running the full tax twice, once with the deduction and once without, rather than multiplying by an assumed rate.
Two worked examples
Renting freelancer, small office, expensive city
- Office / Home: 120 sq ft of 1,600 sq ft = 7.5%
- Net Business Profit: $78,000
- Indirect Home Costs: $27,600/yr
- Simplified Method: $600
- Actual Expense Method: $2,070
- Difference: $1,470 in favour of actual expense
- Tax Saved (actual): $716
- Tax Saved (simplified): $207
- Every deducted dollar is worth: 34.6%
Paid-off home, larger office, low running costs
- Office / Home: 200 sq ft of 2,000 sq ft = 10.0%
- Net Business Profit: $46,000
- Indirect Home Costs: $9,600/yr (no mortgage interest)
- Simplified Method: $1,000
- Actual Expense Method: $960
- Difference: $40 in favour of simplified
- Tax Saved (simplified): $253
- Tax Saved (actual): $243
- Every deducted dollar is worth: 25.3%
Example B is the case people assume cannot happen. Once the mortgage is gone, annual housing costs per square foot can fall below the flat rate, and the method that demands no receipts pays more than the one that demands all of them.
The rules that decide whether you can claim at all
Employees cannot claim this
If your home office is used in your work as an employee, Publication 587's own decision flowchart ends the enquiry: "Are you using the part of your home as an employee? IF Yes → No deduction" (IRS Publication 587). The deduction went with the miscellaneous itemized deductions suspended by the 2017 Act, and the One Big Beautiful Bill Act made that suspension permanent rather than letting it lapse after 2025 (University of Illinois Tax School). Working from home at your employer's request does not change this. Ask about an accountable reimbursement plan instead.
Regular and exclusive use, and the principal place of business test
You must "use a specific area of your home for business on a regular basis", and "incidental or occasional business use is not regular use". The space must also be where you conduct administrative or management work with "no other fixed location where you conduct substantial administrative or management activities" (IRS Publication 587). Storage of inventory and daycare facilities are the two exceptions to exclusivity.
The gross income limitation
The deduction "is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home" (IRS Publication 587). It cannot create or deepen a loss. Under the regular method a disallowed amount can be carried forward; under the simplified method the excess "may not be carried over" (IRS). The calculator applies the cap but does not model a carryforward.
Depreciation, and what it costs you later
The actual expense method also allows depreciation on the business portion of the home, which this calculator deliberately leaves out — so the actual figure above is conservative and your real number would be higher. The trade-off is on the other end: the simplified method allows "no depreciation deduction" and, in exchange, "no recapture of depreciation upon sale of home" (IRS). Claim depreciation now and a slice of your gain is taxable when you sell. Model that with your preparer before choosing the regular method on a home you expect to sell at a gain.
Common questions
Can I switch between the two methods from year to year?
Yes. The choice is made annually, so you can use the simplified method one year and the regular method the next. What does not reset is depreciation: any you claimed under the regular method stays in your record and remains subject to recapture when you sell, even for years you later used the simplified method.
Does the simplified method mean I lose my mortgage interest and property tax deduction?
No, and this is the quiet advantage of it. Under the simplified method, home-related itemized deductions are "claimed in full on Schedule A" rather than being split between Schedule A and the business form (IRS). If you itemize, that softens the gap between the two methods.
My office is bigger than the simplified cap. Does that settle it?
It settles the simplified side, which stops at 300 square feet and therefore at $1,500 however large the room is. It does not settle the comparison, because the actual method scales with your real costs and has no such ceiling. A large office in a cheap-to-run home can still land near the cap either way.
Why does the calculator show a bigger saving than my tax bracket?
Because a Schedule C deduction reduces the profit that self-employment tax is charged on as well as the income that tax brackets apply to. The two savings stack, minus a small offset because the deduction for half your self-employment tax shrinks at the same time. That is why the figure above is computed by running your full tax twice rather than multiplying by a rate.
Primary Statutory Sources & Verification
Programmatically audited against federal & state regulatory recordsThis tool is general information, not tax advice, and it does not model depreciation, state tax, or a carryforward of disallowed amounts. Your facts decide your answer — consult a qualified tax professional before filing. How we source and check every figure is set out in our editorial policy.
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