Maximize Your Home Office Tax Deductions: Simplified vs. Actual Method

Updated: Oct 20

If you're a business owner, subcontractor, or consultant using a home office, you may be eligible for valuable tax deductions.

However, many people don’t realize that there are two methods for calculating home office deductions, each with its pros and cons.

Here’s a quick breakdown:

Actual Method: Deduct actual home-related expenses like utilities and mortgage interest, based on the percentage of your home used for business. This method could give you a larger deduction, but requires you to account for depreciation. This can complicate things when you sell your house.
Simplified Method: This method is easier to manage. You simply multiply the square footage of your office by $5, with a max deduction of $1,500. The deduction may be smaller than the Actual Method, but it avoids the hassle of depreciation.

For W2 employees, home office deductions don’t apply federally, and state deductions are often minimal.

Download our Home Office Deductions Worksheet to walk you through the numbers.