Step 1: Make sure you qualify

  • Exclusive use: The space is used only for business.

  • Regular use: You work there consistently.

  • Principal place of business or client-meeting spot: it is where you do most of your work, or where you regularly meet patients or clients. Your home office also qualifies as your principal place of business if you use it for administrative work (scheduling, billing, charting, records) and have no other fixed location where you do that work.

  • Entity note

  • Sole proprietors / partners: Claim the deduction directly on Schedule C or E.

  • S-Corp owners: You can’t claim the home office deduction personally, but the corporation can reimburse you tax free under an accountable “office in home” plan (details below).

Step 2: Choose your calculation method

A. Simplified just measure the office

  • IRS allows $5 per square foot, up to 300 square feet, so the maximum simplified deduction is $1,500 per year.
  • Example: 150 sq ft × $5 = $750.
  • Minimal record-keeping.

B. Actual expense may save more if costs are high

  • Measure: 150 sq ft office ÷ 1,500 sq ft home = 10% business use.
  • Gather expenses: mortgage interest, rent, utilities, insurance, repairs, etc.
  • Apply the percentage to indirect costs; take direct office only costs at 100%.
  • Example: whole-home costs of $21,250 for the year (mortgage interest, utilities, insurance) × 10% = $2,125, plus $300 to paint the office (a direct cost, counted at 100%) = $2,425 total.

Grab your Home Office Deduction Sheet!

✓ Google Sheets version (makes a copy to your Drive)

✓ Excel version (downloads to your computer)

3. Keep clean documentation

  • Floor plan sketch or photo of the dedicated space.
  • Mileage log if you also drive to outside worksites.
  • Receipts, utility bills, mortgage or rent statements.

Adding an “Office in Home” Accountable Plan (for S Corps)

S Corp owners shift the deduction to the company side by having the corporation reimburse them under a written accountable plan:

Adopt a written policy (one page board resolution) that:

  • Lists reimbursable costs (home office, mileage, supplies).
  • Explains how the home office percentage is calculated.
  • Sets deadlines that follow the IRS safe harbor: substantiate expenses within 60 days after they are paid or incurred, and return any excess reimbursement within 120 days.

Substantiate each period (monthly or quarterly):

  • Home office worksheet with square footage or actual expense details.
  • Copies of mortgage interest/rent, utilities, insurance, direct office costs.
  • Signed statement that the space is used exclusively and regularly for business.

Reimburse through payroll or ACH:

  • Company issues a separate, nontaxable reimbursement (booked to “Office in Home Reimbursements,” not wages).
  • Timely, documented payments stay off your W2 and are fully deductible to the S Corp.

Year-end wrap up:

  • No W2 or 1099 reporting for compliant reimbursements.
  • Doc Wealth keeps the plan, worksheets, and receipts with your tax work papers.

Example: 150 sq ft office in a 1,500 sq ft home (10%). Monthly costs: $1,500 mortgage interest + $350 utilities + $60 insurance = $1,910 indirect × 10% = $191, plus $60 direct office Wi-Fi extender → $251 reimbursed to you tax-free that month.

Key tips & reminders

  • Mixed use rooms don’t qualify.
  • Internet is deductible in proportion to business use. Cell phone costs are reimbursable or deductible for the business-use percentage as well, but only if you can support the split, for example with a usage review or a dedicated line.
  • If you use the actual expense method and later sell the house, depreciation recapture applies on the office portion.
  • You may switch between simplified and actual methods year to year if you keep the required support.