How do I calculate the home office deduction for self-employment in 2025?

Self-employed individuals (Schedule C filers) can deduct home office expenses using either the simplified method or the regular method. W-2 employees cannot claim this deduction at the federal level under current law (TCJA suspended it through 2025).

Simplified method:

• $5 per square foot of dedicated office space
• Maximum 300 square feet = $1,500 maximum deduction
• No depreciation calculation needed
• No recapture of depreciation when you sell your home
• Report on Schedule C, line 30

Regular method (actual expenses):

• Calculate the percentage of your home used for business (office square footage / total home square footage)
• Apply that percentage to: mortgage interest or rent, property taxes, utilities, homeowner's insurance, repairs, depreciation
• Example: 200 sq ft office in a 2,000 sq ft home = 10%. If total eligible expenses are $24,000, your deduction is $2,400.
• Report on Form 8829 (Expenses for Business Use of Your Home)

Qualification requirements (both methods):

• The space must be used regularly and exclusively for business. A guest bedroom you sometimes use as an office does not qualify.
• It must be your principal place of business OR a place where you regularly meet clients. If you have a separate office but also do administrative work at home, the home office can still qualify as a second business location.

Which method is better? Run the numbers both ways. The regular method is usually better if your office is large relative to your home, your housing costs are high, or you want to claim depreciation. The simplified method is easier and avoids depreciation recapture issues.