How this calculator works
Tax year: 2026, United States. The simplified method allows $5 per square foot of space used regularly and exclusively for business, up to 300 square feet, so the most it can produce is $1,500. The regular method takes the business percentage of the home and applies it to actual home expenses such as rent, utilities, insurance and repairs, with depreciation for a home you own, and keeps records of each expense. Whichever method is used, the deduction cannot exceed gross income from the business less other business expenses, and the excess can be carried forward under the regular method but not under the simplified method. The simplified method takes no depreciation and no home sale depreciation recapture, while the regular method does. This is a US federal rule; Canada applies different tests to employees who work from home, so these figures do not carry over. The model leaves out the exclusive and regular use test, the principal place of business test, the day care rules, the split between mortgage interest, property tax, insurance and repairs, depreciation, the carryforward, and the election to switch methods in a later year.
Formula
Business share = office area / total home area. Simplified method: square feet used = min(office area, 300); deduction before the limit = square feet used x $5. Regular method: deduction before the limit = annual home expenses x business share. Deduction = min(deduction before the limit, gross business income). Disallowed amount = deduction before the limit - deduction.
Worked example
A freelancer uses a 200 square foot office in a 2,000 square foot home and has $12,000 of annual home expenses and $30,000 of business income. The business share is 10%, so the regular method gives $1,200 and the income limit does not bind. The simplified method gives 200 x $5, which is $1,000, so the regular method is larger in this case. A 400 square foot office would be capped at 300 square feet and $1,500 under the simplified method.
Frequently asked questions
How much is the simplified home office deduction?
It is $5 per square foot of business space, up to 300 square feet, so the maximum is $1,500 for 2026. The deduction is also limited to the gross income from the business.
Can I claim the home office deduction as an employee?
Generally no for 2026. The deduction is available to self-employed people and business owners; employees cannot claim unreimbursed home office expenses on a federal return.
Which home expenses count under the regular method?
Rent or mortgage interest, property tax, utilities, insurance, repairs and depreciation are typical. The business percentage is applied to each expense, and records must be kept.
Can I use the simplified method and the regular method together?
Not for the same home office in the same year. You choose one method for the year, and the simplified method cannot be used if you deduct depreciation for the same space.