Use the Simplified Method Worksheet, Not Form 8829
Claiming the home office deduction doesn't always require Form 8829. Learn the streamlined process using a simple worksheet for a direct calculation on your Schedule C.
Many self-employed individuals are familiar with the home office deduction but are often confused about how to claim it. While IRS Form 8829, Expenses for Business Use of Your Home, is well-known, it is used exclusively for the regular method of calculating the deduction. This article focuses on the simplified method, a more direct approach that does not use Form 8829. Instead, the calculation is performed using a worksheet found within the instructions for Schedule C (Form 1040), streamlining the process.
Eligibility for the Home Office Deduction
To qualify for the home office deduction using any method, you must first meet two IRS tests. The first is the “regular and exclusive use” test. This means a specific area of your home must be set aside solely for conducting your trade or business, and it must be used on an ongoing basis.
The space cannot be used for both personal and business activities. For example, a desk in a corner of a family room that is also used for household activities would not qualify. The area must be a separately identifiable space, though it does not need to be a permanently partitioned room. “Regular use” implies that the space is used consistently for business, not just occasionally.
The second requirement is the “principal place of business” test. Your home office must be the primary location from which you conduct your business. This is the case if you perform your most important income-generating activities there or use the space to manage your business with no other fixed location. An exception exists if you physically meet with clients in your home as a normal part of your business, in which case it may qualify.
Calculating the Deduction Using the Simplified Method
The simplified method removes the need to track actual home expenses like utilities, insurance, or depreciation. To begin, you only need the square footage of the area you use exclusively for business. You should accurately measure only the floor space of the room or area dedicated to your business activities.
Once you have the square footage, the calculation is simple. The IRS allows you to multiply this area by a prescribed rate, which for the 2025 tax year is $6 per square foot. The area used for this calculation is capped at a maximum of 300 square feet. This means the largest possible deduction you can claim is $1,800 per year. For instance, if your office is 150 square feet, your deduction is $900, while an office of 400 square feet is limited to the 300-square-foot maximum, resulting in a $1,800 deduction.
A rule associated with this method is the gross income limitation. Your home office deduction cannot exceed the gross income your business earns, minus your other business expenses. If your business has a gross income of $5,000 and $4,000 in other expenses, your net profit before the home office deduction is $1,000. Your home office deduction would be limited to $1,000, even if your calculation resulted in a higher amount. Any portion of the deduction that goes unused due to this income limitation cannot be carried over to a future tax year.
If you start or stop using your home for business during the year, the deduction must be prorated. To do this, you calculate the average monthly allowable square footage. For any month with fewer than 15 days of business use, the square footage for that month is considered zero. You then add the square footage used for each month, up to the 300 sq. ft. maximum for any given month, and divide the total by 12. This average is then used in your deduction calculation.
Reporting the Deduction on Your Tax Return
After calculating your deduction, you report it on your tax return. Since this method is tied to your self-employment activities, the information is entered on Schedule C (Form 1040), Profit or Loss from Business. The worksheet you used for the calculation is for your records only and is not attached to your return.
On Schedule C, you will find a line designated for the simplified method. You will enter the total square footage of your home and the square footage of the area used for business on the appropriate lines. The final calculated deduction amount is then entered on Line 30, “Expenses for business use of your home.”