The Test the IRS Actually Applies
The home office deduction requires a space used regularly and exclusively for business — a spare room used only for work qualifies; a kitchen table you also eat dinner at does not. There's no minimum size requirement, but the exclusivity test is strict and is the first thing that gets challenged in an audit.
Two Ways to Calculate It
The simplified method gives you $5 per square foot of office space, up to 300 square feet — a $1,500 maximum, no receipts required. The regular method lets you deduct the actual business-use percentage of your rent, utilities, and insurance, which is often larger but requires more recordkeeping.
Which Method Actually Saves You More
If your home office is small or your actual housing costs are low, the simplified method is usually easier and close enough in value. If you have a larger dedicated space or high rent/mortgage costs, the regular method often produces a bigger deduction — worth the extra tracking.
What Renters Can Deduct Too
This deduction isn't just for homeowners. Renters can deduct the business-use percentage of rent, renters insurance, and utilities the same way — the calculation is identical, just applied to rent instead of mortgage interest.