• The regular and exclusive use tests (US)
  • Qualifying uses and employees (US)

The home office deduction, which the IRS calls the deduction for business use of your home, covers expenses for the part of a home used for a trade or business. For US federal tax, the space has to pass the IRS tests, including regular and exclusive use. For the 2025 tax year, IRS Publication 587 describes two ways to figure the amount. For the simplified method, it says "In most cases" you multiply "$5, the prescribed rate" by the area used for business, which "is limited to 300 square feet". The regular method uses actual expenses and Form 8829 if you file Schedule C. Employees can't take it on their own return. Ask a tax professional whether your space and your business qualify.

Billed publishes this page. It's general information about US federal tax, not tax advice. The IRS quotes come from Publication 587 (2025), which says it's "For use in preparing 2025 Returns", the Instructions for Form 8829 (2025), the About Form 8829 page (last reviewed March 31, 2026) and the IRS simplified option page (last reviewed March 2, 2026). All were opened on October 30, 2026. State rules can differ from federal rules.

The regular and exclusive use tests (US)

The IRS simplified option page says that under both methods, the deduction is "allowed only if that portion is exclusively used on a regular basis for business purposes".

Publication 587 (2025) defines each test:

  • Exclusive use: "To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition."
  • Regular use: "To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use. You must consider all facts and circumstances in determining whether your use is on a regular basis."

It also says: "You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes." Publication 587 lists two exceptions to the exclusive use test: storage of inventory or product samples, and use as a daycare facility.

Qualifying uses and employees (US)

In brief: Publication 587 (2025) lists the ways the space can qualify, including as your principal place of business or as a place where you meet clients, and the IRS says employees can no longer claim a home office deduction. The guide to claiming home office expenses quotes both rules in full.

The simplified method (2025)

Publication 587 (2025) says: "In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. The area you use to figure your deduction is limited to 300 square feet."

The IRS simplified option page adds:

  • "No home depreciation deduction or later recapture of depreciation for the years the simplified option is used."
  • "You may choose to use either the simplified method or the regular method for any taxable year."

The simplified method has a gross income limitation too. In its simplified method section, Publication 587 (2025) says: "Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home."

The regular method and Form 8829 (2025)

The IRS About Form 8829 page says: "Use Form 8829 to figure the allowable expenses for business use of your home on Schedule C (Form 1040) and any carryover to next year of amounts not deductible this year."

The Instructions for Form 8829 (2025) say not to use the form when "You have elected to use the simplified method for your home for 2025."

The regular method starts from a business percentage. Publication 587 (2025) says: "To find the business percentage, compare the size of the part of your home that you use for business to your whole house." One method it gives is: "Divide the area (length multiplied by the width) used for business by the total area of your home."

On limits, it says: "If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited."

Records to keep (US)

Publication 587 (2025) says: "You do not have to use a particular method of recordkeeping, but you must keep records that provide the information needed to figure your deductions for the business use of your home. You should keep canceled checks, receipts, and other evidence of expenses you paid."

It says your records must show:

  • "The part of your home you use for business."
  • "That you use part of your home exclusively and regularly for business as either your principal place of business or as the place where you meet or deal with clients or customers in the normal course of your business."
  • "The depreciation and expenses for the business part."

Sample: the same office under both methods (tax year 2025)

The figures here are a sample for the 2025 tax year. A sole proprietor who files Schedule C uses a 350-square-foot room only for business, all year, in a 1,750-square-foot rented home. The sample assumes the room passes the IRS tests.

  1. Simplified method: the allowable area is the smaller of 350 and 300 square feet, so 300. 300 × $5 = $1,500, before any gross income limit.
  2. Business percentage for the regular method: 350 ÷ 1,750 = 20%.
  3. Regular method, indirect expenses: rent of $18,000 plus utilities of $2,400 = $20,400. 20% × $20,400 = $4,080 is the business part of those expenses that goes into Form 8829, before the deduction limit and the form's other rules.

Which method gives the larger deduction on a real return depends on the business's gross income, the limit, depreciation and other expenses. Ask a tax professional before you choose.

Where Billed fits

Billed's expenses and receipts page says: "Attach the receipt when you record the expense, and it stays with that entry in your Billed account instead of in a drawer or an inbox." It also says: "Reports can be filtered by date range and exported for your accountant, bookkeeper or tax software." Billed's financial reporting page lists "Expense Reports" among its reports.

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Frequently Asked Questions

What are the IRS regular and exclusive use tests?

For the exclusive use test, IRS Publication 587 (2025) says: "you must use a specific area of your home only for your trade or business." For the regular use test, it says: "you must use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use." Ask a tax professional how the tests apply to your space.

What is the simplified method for the 2025 tax year?

IRS Publication 587 (2025) says: "In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. The area you use to figure your deduction is limited to 300 square feet."

Do I need Form 8829?

The IRS About Form 8829 page says: "Use Form 8829 to figure the allowable expenses for business use of your home on Schedule C (Form 1040) and any carryover to next year of amounts not deductible this year." The 2025 instructions say not to use it when "You have elected to use the simplified method for your home for 2025."

Does a desk in a shared room count?

IRS Publication 587 (2025) says: "You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes." It also says the business area "can be a room or other separately identifiable space." Ask a tax professional whether your setup qualifies.

Can employees who work from home claim the home office deduction?

The IRS simplified option page says: "taxpayers can no longer claim a deduction for use of a home office as an employee, as miscellaneous itemized deductions for employee business expenses were eliminated for tax years beginning after 2017, even if the simplified method is used."

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