Every tax season, work-from-home people ask the same question: is the home office deduction actually worth the paperwork? I decided to stop guessing and run both IRS methods with my real numbers. The answer surprised me — and it'll probably surprise you too, in the opposite direction.
Simplified: $5 per square foot of office space, up to 300 square feet. Max deduction: $1,500. One line on your return, no receipts, no depreciation recapture later.
Actual (regular): you deduct the business percentage of mortgage interest or rent, utilities, insurance, repairs, and depreciation. More money, more paperwork, and depreciation gets recaptured as taxable income when you sell the house.
My office is 180 square feet in a 1,800 square foot house — exactly 10%. Annual home costs: $14,400 mortgage interest, $3,600 utilities, $1,800 insurance, $2,400 repairs. Total: $22,200. Ten percent is $2,220, plus depreciation on the home's structure (roughly another $1,100 a year on my place). Actual method total: about $3,320.
| Method | Deduction | Tax saved (22% bracket) | Paperwork |
|---|---|---|---|
| Simplified | $900 (180 sq ft × $5) | $198 | Almost none |
| Actual | ~$3,320 | ~$730 | Real bookkeeping |
The actual method wins by about $530 in tax savings. But — and this is the part nobody mentions — depreciation recapture means when I sell, I'll owe tax on that $1,100-a-year depreciation at 25%. Over ten years that's $11,000 of recapture, or $2,750 in tax, wiping out years of the advantage.
It takes five minutes and the answer is personal — your square footage, your costs, your bracket. The home office deduction calculator runs simplified vs actual side by side so you can see your own break-even instead of trusting my anecdote.