Home Office Expenses: Examples and How to Calculate Them

Working from home has gone from a temporary office setup to a long-term reality for many people. If you run a business, freelance, or earn income independently, your home office may qualify for valuable tax deductions. Understanding home office expenses - what counts, what doesn’t, and how to calculate them correctly - can make a real difference at tax time.

This guide breaks down home office expenses in plain language, with real examples and step-by-step calculation methods so you can claim deductions accurately and confidently.

What Are Home Office Expenses?

Home office expenses are costs related to using part of your home exclusively and regularly for business purposes. When eligible, these expenses can be deducted to reduce your taxable business income.

To qualify, your home office generally must meet two conditions:

• Exclusive use: The space is used only for work, not personal activities
• Regular use: The space is used consistently for business, not occasionally

The home office must also be your principal place of business, or a place where you regularly meet clients or conduct essential business activities.

Who Can Claim Home Office Expenses?

Not everyone who works from home can claim home office deductions. Eligibility depends on how you earn income.

Typically Eligible

• Self-employed individuals
• Freelancers and independent contractors
• Small business owners
• Side-hustlers with business income

Usually Not Eligible

• W-2 employees working remotely for an employer (even full-time)

Unless you are self-employed or operate a business, home office expenses generally cannot be deducted.

Home Office Expenses Examples

Understanding examples is the easiest way to see what qualifies. Home office expenses fall into two main categories: direct and indirect.

Direct Home Office Expenses

These expenses apply only to your home office space and are typically 100% deductible.

Examples include:

• Desk, office chair, filing cabinets
• Computer, monitor, keyboard, printer
• Office lighting installed in the workspace
• Repairs made only to the office (e.g., fixing office drywall)
• Dedicated business phone line

Indirect Home Office Expenses

Indirect expenses benefit your entire home and must be allocated based on how much of your home is used for business.

Common examples:

• Rent or mortgage interest
• Electricity, water, heating, gas
• Internet and phone service (business portion only)
• Homeowners or renters insurance
• Property taxes
• General office maintenance and cleaning

These costs are partially deductible according to the percentage of your home used for work.

Expenses That Usually Don’t Qualify

Some costs are commonly misunderstood and often incorrectly claimed:

• Furniture used outside the office
• Home décor not related to work
• Full internet or phone bills without allocation
• Multipurpose rooms (guest room + office)
• Kitchen, bedroom, or living room workspaces

If a space is used personally even part of the time, it usually fails the exclusive-use test.

Business Home Office Expenses Explained

What Counts as a Business Home Office?

A business home office must be:

• Clearly defined (room or partitioned area)
• Used only for business
• Essential to operating your business

Your business structure - sole proprietor, LLC, or corporation - does not change what qualifies, but it may affect how deductions are reported.

Common Business Home Office Expense Categories

Business home office expenses often include:

• Furniture and equipment depreciation
• Software subscriptions and cloud tools
• Office supplies and consumables
• Repairs and maintenance
• Utilities and occupancy costs

If an expense is ordinary, necessary, and tied to your business use of the home, it may qualify.

Record-Keeping Best Practices

Good documentation is critical. You should keep:

• Receipts and invoices
• Utility bills
• Rent or mortgage statements
• Floor plan or square footage measurements
• Internet and phone usage breakdowns

Digital records are acceptable as long as they are accurate and organized.

How to Calculate Home Office Expenses

There are two accepted methods for calculating home office expenses. Choosing the right one depends on your situation.

Step 1: Measure Your Home Office Space

Calculate:

• Total square footage of your home
• Square footage of your home office

Then divide home office size by total home size to get your business-use percentage.

Example

• Home size: 2,000 sq ft
• Office size: 200 sq ft
• Business use: 10%

Step 2: Choose a Calculation Method

Simplified Method

The simplified method uses a flat rate per square foot.

• Fixed rate per square foot (up to a maximum size)
• No depreciation or expense tracking required

Pros

• Easy to calculate
• Minimal paperwork

Cons

• May result in a smaller deduction

This method works well for small home offices or simple setups.

Actual Expense Method

The actual expense method allows you to deduct a percentage of real home expenses.

Steps:

1. Add up eligible home expenses (rent, utilities, insurance, etc.)
2. Multiply total expenses by your business-use percentage
3. Add direct office expenses separately

Pros:

• Often results in larger deductions
• Reflects true costs

Cons:

• Requires more records
• More complex calculations

Step 3: Calculate and Apply the Deduction

Once calculated, the deduction reduces your business income - not your personal income - lowering the taxes owed on your business earnings.

Home Office Expense Calculation Example

Let’s walk through a simple example.

• Home size: 1,500 sq ft
• Office size: 150 sq ft (10%)

Annual expenses:

• Rent: $18,000
• Utilities: $2,400
• Internet: $1,200 (50% business use = $600)

Indirect expenses total:

• $18,000 + $2,400 = $20,400
• 10% business use = $2,040

Add direct expenses: Desk and chair ($900)

Total home office deduction: $2,040 + $900 = $2,940

Common Mistakes to Avoid When Claiming Home Office Expenses

• Claiming shared or personal spaces
• Over-allocating internet or utility usage
• Missing receipts or documentation
• Using the wrong method inconsistently
• Forgetting depreciation rules

Accuracy matters more than maximizing deductions - and having reliable tools can help you stay organized. For example, consider using MYOB business accounting to track expenses, receipts, and calculations in one place.

FAQs

Can I claim home office expenses if I rent?

Yes. Rent is considered an indirect expense and can be partially deducted based on business use.

Can I deduct a desk and office chair?

Yes, if they are used exclusively for business.

How much can I deduct for home office expenses?

There is no fixed limit under the actual expense method, but deductions must reflect real, documented costs.

What if I use the room for work and personal use?

The space usually won’t qualify due to failing the exclusive-use requirement.

Is internet a home office expense?

Yes, but only the portion used for business purposes.

Conclusion

Home office expenses can be a legitimate and valuable deduction if you qualify and calculate them correctly. By understanding what counts, keeping good records, and choosing the right calculation method, you can reduce your taxable business income without unnecessary risk.

When your situation becomes more complex - multiple income streams, depreciation, or large deductions - professional tax advice is often worth it. For many self-employed workers, though, mastering the basics of home office expenses is a smart first step toward better financial efficiency.