Are Home Office Expenses a Risky Deduction?
That’s a common misconception—and an unfortunate one—because millions of Americans qualify for this deduction. According to recent statistics, approximately 30 million individuals work from home at least one day a week, and a growing number of professionals, including attorneys and consultants, operate fully or partially from home.
For years, claiming home office deductions was rumored to trigger audits. In reality, much of the hesitation came from a lack of understanding of this section of the tax code. Fortunately, IRS guidance and key court rulings—particularly the 1994 Supreme Court decision and legislative updates in 2007—have made it easier and clearer to qualify.
Today, with proper documentation and qualification, this deduction is a legitimate and valuable tax-saving strategy.
Three Ways to Qualify for a Home Office Deduction
Your home office may qualify if it meets any one of the following:
- It is your principal place of business,
- It is used regularly to meet clients, patients, or customers, or
- It is located in a separate structure not attached to your home (e.g., a studio, converted garage, or guesthouse).
You only need to meet one of these criteria—not all three.
1. Principal Place of Business
This is the most common qualifier. According to IRS Publication 587, your home office qualifies if:
- It’s used exclusively and regularly for administrative or management activities, and
- You have no other fixed location where you perform substantial administrative or management tasks.
Example: You’re an attorney with access to a shared office or coworking space for client meetings. However, you manage your firm, keep books, and handle paperwork primarily from your home office. Your home office qualifies even if you occasionally use the shared space.
2. Partial Room Use Is Allowed
Your home office doesn’t need to be a full room. A portion of a room can qualify if it’s exclusively and regularly used for business. For example, a dedicated desk area in your living room may be sufficient.
If the space is used for multiple businesses, each must independently qualify.
To support your deduction:
- Maintain a log of business hours spent in the space.
- Photograph your workspace as evidence.
- Ensure it meets the “regular and exclusive use” standard—typically around 10–12 hours per week.
3. Calculating the Deduction: Business Use Percentage
Once your space qualifies, calculate the portion of your home expenses that applies to your business use.
Step 1: Determine Business Percentage
- Square footage method: Divide the square footage of your office by your home’s total square footage.
Example: 180 sq. ft. home office / 2,400 sq. ft. home = 7.5% business use
- Room method: If rooms are approximately equal in size, divide the number of rooms.
Step 2: Apply to Expenses
- Use that percentage to deduct:
- Mortgage interest (business return only),
- Property taxes (can be split between Schedule A and business return if applicable),
- Rent (if renting your home),
- Utilities (electricity, gas, water, etc.),
- Homeowner’s or renter’s insurance,
- Repairs and maintenance,
- Garbage pickup,
- Security system costs, and
- HOA dues (if applicable).
If you own your home, you may depreciate the business-use portion of your home over 39 years (nonresidential property). Land is not depreciable.
Note: Depreciation must be recaptured if you later sell the home, but you can still exclude the $250,000/$500,000 of gain (if you meet the residency test) unless the home office is in a separate dwelling unit.
2025 Safe Harbor Simplified Method
The IRS allows a simplified method known as the safe harbor method:
- Deduct $5 per square foot, up to 300 sq. ft. = maximum $1,500 deduction.
- No recordkeeping of actual expenses is required.
- You cannot claim depreciation or carry forward unused losses.
- Mortgage interest and property taxes must still be claimed on Schedule A, not on the business return.
This option is easier but may yield a smaller deduction than the traditional method. It’s worth running both calculations to determine which saves more.
Bonus Tip: Car Deduction Boost
Claiming a home office also converts your drive from home to a client’s location into business mileage, eliminating previously nondeductible commuting miles. This can significantly increase your vehicle expense deduction.
What If Home Office Expenses Exceed Net Business Income?
If your 2025 home office expenses exceed your business income, you cannot deduct the loss. However, you can carry the unused deduction forward to future years when your business earns more income.
Key 2025 Numbers to Know
- Safe Harbor Home Office Deduction Max: $1,500 (300 sq. ft. × $5)
- Home Depreciation Period: 39 years for business-use portion of home (nonresidential)
- Mileage Rate (2025 IRS standard): TBD – to be confirmed by IRS later in 2025 (2024 was 67 cents per mile)
Final Thoughts
There are many tax-saving strategies available to attorneys and professionals who know where to look. The home office deduction is just one of many tools available to reduce taxable and self-employment income—legally and effectively.
If you’d like help determining whether your home office qualifies—or if you’re ready to create a more comprehensive tax strategy—reach out to a tax professional who specializes in strategic planning.
After all, the goal is simple:
To help you keep more of your hard-earned money.