IRS Pub 587 · IRC §280A · Rev. Proc. 2013-13 · Form 8829 · OBBBA §70110 · TY 2026
The 2026 home office deduction under IRC §280A and IRS Pub 587. Regular and exclusive use test, principal place of business safe harbor, simplified method ($5/sq ft, $1,500 cap) vs regular method (Form 8829 actual expenses), §280A(c)(5) gross income limitation, depreciation recapture on home sale, OBBBA §70110 W-2 employee disallowance, daycare and inventory storage exceptions.
Want to compute your 2026 deduction instantly under both the simplified method and the regular method, with the §280A(c)(5) gross income limitation and OBBBA W-2 disallowance flag built in? Open the calculator.
Open the Home Office Deduction Calculator →The 2026 home office deduction under IRC §280A and IRS Pub 587 comes in two flavors. The simplified method (Rev. Proc. 2013-13) allows $5 per square foot of qualified business-use space, capped at 300 sq ft and $1,500 per year, claimed directly on Schedule C line 30 with zero depreciation (and therefore no later §1250 recapture at sale). The regular method on Form 8829 multiplies actual home expenses (mortgage interest, real estate taxes, insurance, utilities, repairs, depreciation) by the business-use percentage. Both methods require regular and exclusive use of the office space and the home as principal place of business, with safe harbors for separate free-standing structures, daycare facilities, and inventory storage by retailers/wholesalers. The §280A(c)(5) gross income limitation caps the deduction at gross business income minus other business deductions - it cannot create or increase a Schedule C loss. W-2 employees are permanently disallowed under OBBBA §70110 (signed July 4, 2025) - the proper response is an accountable plan reimbursement from the employer.
Eligibility is determined by filer status and by whether the home office meets the two tests under IRC §280A(c)(1). Six categories of taxpayer can potentially claim a home office deduction; one major category (W-2 employees) is permanently disallowed.
Sole proprietors filing Schedule C, single-member LLCs taxed as disregarded entities, and farmers filing Schedule F can claim the home office deduction under either the simplified or regular method. The deduction goes to Schedule C line 30 (sole prop / single-member LLC) or Schedule F line 32 (farmer). It reduces both federal income tax and self-employment tax. This is the cleanest filer category and the one most home office advisory assumes.
Partners in a general partnership, limited partnership, or LLC taxed as a partnership can claim home office expenses as Unreimbursed Partnership Expense (UPE) on Schedule E Part II only if the partnership agreement requires partners to pay their own home office expenses (or has an established practice to that effect). The deduction is computed using the same §280A rules but reported separately on Schedule E. UPE reduces both income tax and SE tax (partners' share of partnership income is generally SE income). Partnership agreements should be updated to explicitly require partner-borne home office expense if any partner plans to claim UPE.
S-corp shareholder-employees are W-2 employees of the corporation for the home office activity and therefore cannot claim a personal Schedule C home office deduction. The standard recommended path is an accountable plan reimbursement under Treas. Reg. §1.62-2: the corporation adopts a written accountable plan, the shareholder submits a substantiated home office expense report, and the corporation reimburses tax-free. The corporation deducts the reimbursement on Form 1120-S as a business expense.
Licensed daycare providers operate under §280A(c)(4) and use a time-and-space allocation rather than the strict exclusive-use test. The deduction goes to Schedule C line 30 like any other self-employed business, but the business-use percentage is computed using Form 8829 Part I lines 4-7 (hours of daycare use divided by total hours in year, times daycare space divided by total home space). Both the simplified and regular methods are available; the simplified method's 300 sq ft cap is applied to the daycare's qualifying space.
Per OBBBA §70110, W-2 employees outside the four narrow above-the-line categories in §62(a)(2) cannot claim a home office deduction on their personal return. This includes remote workers, sales representatives using a home office, employed real estate agents, employed accountants working from home, and any other W-2 worker who maintains a home workspace. The disallowance is permanent (TCJA-era through OBBBA). The four above-the-line exceptions (reservists, fee-basis state-local officials, qualified performing artists, eligible educators) do not extend to a home office deduction; they only cover trade-related travel expenses on Form 2106. The proper W-2 response is an accountable plan home office reimbursement.
Statutory employees (those reporting on Schedule C with Box 13 of Form W-2 checked - certain insurance agents, traveling salespeople, drivers, and home workers) file Schedule C and may claim the home office deduction like any other self-employed taxpayer. They are not subject to the OBBBA §70110 disallowance because they file Schedule C, not Schedule A.
To qualify for any home office deduction, the office space must satisfy two requirements:
The office area must be used regularly and exclusively for business. "Regularly" means continuously and consistently used for business throughout the year - not occasional or sporadic use. "Exclusively" means the area is used solely for business; any personal or family use of the same area at any point during the year defeats exclusivity and disqualifies the deduction.
The area can be a whole room or a clearly identifiable portion of a room (a desk area in a corner of the living room, for example). However, mixed-use areas - a guest bedroom that doubles as a home office, a kitchen table where you also eat meals, a basement that holds both an office and a treadmill used for personal exercise - fail the exclusive-use test. Some practitioners recommend physical separation (room divider, screen, or designated furniture layout) to demonstrate exclusivity at audit.
Two exceptions to strict exclusive use exist under §280A(c)(2) (inventory storage by retailers/wholesalers) and §280A(c)(4) (daycare facility use); see those sections below.
The home must be the taxpayer's principal place of business. This test is satisfied if any one of the following is true:
In Commissioner v. Soliman, 506 U.S. 168 (1993), the Supreme Court held that an anesthesiologist who treated patients exclusively at hospitals (not at home) but used his home office for billing, scheduling, and other administrative work could not claim a home office deduction because his "principal place of business" was the hospitals where he treated patients, not his home. This holding gutted the home office deduction for many traveling professionals, consultants, and tradespeople who worked off-site but maintained a home office for administrative purposes.
Congress reversed Soliman in the Taxpayer Relief Act of 1997 by adding §280A(c)(1)(A): a home office qualifies as the principal place of business if the taxpayer uses it substantially and regularly to conduct administrative or management activities and has no other fixed location for those activities. This is the doctrinal basis for most modern home office deductions by contractors, plumbers, consultants, real estate agents, and other professionals who work both on-site (at client locations) and at home (for billing, scheduling, research, and client follow-up).
Revenue Procedure 2013-13, effective for tax years beginning on or after January 1, 2013, established a safe-harbor simplified method as an alternative to the regular method. The simplified method dramatically reduces recordkeeping and form-filing burden while preserving a meaningful deduction for typical home office users.
Simplified deduction = $5 per square foot of home used for qualified business purposes, capped at 300 square feet, for a maximum of $1,500 per year. The $5 rate has not changed since 2013 (no inflation adjustment was built into Rev. Proc. 2013-13). The 300 sq ft cap is per dwelling, not per business - if you operate two businesses from the same home office, you can split the 300 sq ft between them but not exceed the total cap.
Self-employed: directly on Schedule C line 30 with the simplified-method box marked. No Form 8829 is filed. Farmer: Schedule F line 32. The simplified method does not require allocation of mortgage interest, real estate taxes, insurance, utilities, or any other home expenses to the business portion.
Because the simplified method does not allocate any home-expense components to the business, mortgage interest (up to the §163(h)(3) cap on the first $750K of acquisition debt for primary and secondary residences) and real estate taxes (subject to the OBBBA-extended $10K SALT cap, raised to $40K under OBBBA §70106) remain 100% claimable on Schedule A line 8 and line 5b. This is a significant simplification compared to the regular method's apportionment requirement.
The simplified method treats depreciation of the home as zero. This means no portion of the home's basis is recovered through the home office deduction. The major non-obvious advantage: at sale, no portion of the home's basis has been depreciated by the simplified method, so there is no §1250 unrecaptured gain recapture attributable to the simplified-method years. Taxpayers planning to sell within 5 to 10 years often find the simplified method's protection from recapture outweighs the difference between the $5 rate and the regular method's actual computation.
The §280A(c)(5) gross income limitation applies to the simplified method the same way it applies to the regular method. But unlike the regular method, simplified method excess is NOT carried forward to future years - it is permanently lost. Taxpayers with low or fluctuating Schedule C income (where the gross income limit may bind in some years) should consider the regular method to preserve carryforward.
Under Rev. Proc. 2013-13 §4.04, the simplified method is available for only one home in any tax year. If you used two homes for the same business (snowbird scenario, mid-year relocation), the simplified method applies to one and the regular method applies to the other - or both must use the regular method.
The regular method, also called the "actual expense" method, multiplies the business-use percentage by actual home expenses. It is reported on Form 8829 (Expenses for Business Use of Your Home), which calculates the total home office deduction and then flows the result to Schedule C line 30.
Per IRS Pub 587 and Form 8829 Part I, business-use percentage is calculated as office square footage divided by total home square footage. An alternative method (Form 8829 line 3 narrative) is the number of rooms used for business divided by the total number of rooms in the home, if all rooms are approximately equal size. The square-footage method is more commonly used and more defensible at audit. Total home square footage includes all finished living space - basement (if finished and used as part of the home), attic conversions, but generally excludes attached garages unless used as part of the office.
Form 8829 Part II line 9-20 covers indirect expenses shared between personal and business use of the home, prorated by the business-use percentage:
Form 8829 Part II line 19 covers direct expenses used only in the home office space, deducted 100 percent:
The home depreciation portion is the most complex piece of the regular method. The taxpayer's depreciable basis equals the cost basis of the home (purchase price plus capital improvements) minus the value of the land at acquisition. The depreciable basis is then multiplied by the business-use percentage to get the office portion. The office portion is recovered over 39 years using straight-line depreciation (the standard recovery period for nonresidential real property under §168(c) and §168(e)(2)(B)).
Example: Home purchased for $500,000 ($100,000 land, $400,000 building). Depreciable basis = $400,000. Business-use percentage = 12%. Office depreciable basis = $48,000. Annual depreciation = $48,000 / 39 = $1,231 per year. (Form 8829 Part III computes this using IRS-published recovery percentages.)
Form 8829 Part II line 36 applies the §280A(c)(5) gross income limit. Excess expenses above the limit are carried forward to Form 8829 line 43 (operating expense carryover) and line 44 (excess casualty losses and depreciation carryover). The carryforward is unlimited in duration and survives until offset by future home-office-related gross income (subject to the same limitation in each carryover year).
IRC §280A(c)(5) imposes a gross income limit on the home office deduction to prevent the deduction from creating or increasing a business loss. The limit applies to both the simplified method and the regular method.
Cap = gross income from business use of the home minus the deductions allocable to the business use that would be allowed even without the home office deduction. In practice for Schedule C filers, the cap equals: gross income from the trade or business minus other Schedule C deductions (supplies, advertising, vehicle expenses, contract labor, etc.) minus the portion of mortgage interest and real estate taxes that would be deductible on Schedule A regardless of business use.
Form 8829 implements the limit in two steps. First, the deductible portion of mortgage interest and real estate taxes (Form 8829 lines 9 and 10) is treated as "tier 1" - deductible up to the gross income limit. Second, operating expenses other than mortgage interest, real estate taxes, and depreciation (Form 8829 lines 11-15, "tier 2") are deductible to the extent of remaining gross income. Third, depreciation (Form 8829 line 23, "tier 3") is deductible only to the extent of any remaining gross income after tiers 1 and 2.
This tier structure has an important consequence: in a low-income year, the depreciation deduction may be entirely deferred (carried forward), preserving the home's basis from immediate reduction. In a high-income year, the depreciation is fully claimed and the basis reduction is realized. The simplified method's flat $5/sq ft does not have this tier structure.
Excess operating expenses carry forward to next year's Form 8829 line 43; excess depreciation carries forward to line 44. The carryforward stays with the regular method - if you switch to the simplified method in the carryover year, the carryforward is suspended until you switch back to the regular method (it does not become deductible under the simplified method). Pre-switch carryforward survives until used.
The simplified method has no carryforward. If your $1,500 simplified deduction would create a Schedule C loss, only the amount up to your gross-income-limit-net-of-other-deductions is allowed; the rest is permanently lost. For a freelancer with $800 net Schedule C income before the home office deduction, the simplified deduction is capped at $800 - the other $700 disappears.
The most important post-TCJA home office rule for W-2 employees: you cannot deduct a home office on your personal return. OBBBA §70110 (Public Law 119-21, signed July 4, 2025) made the TCJA-era suspension of all miscellaneous itemized deductions subject to the §67 two-percent of AGI floor permanent. Home office expenses for employees were classified as miscellaneous itemized deductions before TCJA; the disallowance applies to home office expenses just as it applies to unreimbursed business mileage, professional dues, work-from-home computer costs, and any other employee business expense.
Employees who work from home full-time (whether by choice or because their employer is remote-first) cannot claim a Schedule A miscellaneous itemized deduction for their home office. The deduction does not appear on Form 2106 (now used only by the four narrow above-the-line categories), does not appear on Schedule 1, and does not appear on Schedule A. It is simply lost. This applies to remote-first tech workers, customer service representatives working from home, employed real estate agents, employed accountants and lawyers in remote firms, employed teachers conducting virtual classes from home, and any other W-2 worker maintaining a workspace at home.
The four §62(a)(2) above-the-line categories that survived TCJA - reservists, fee-basis state-local officials, qualified performing artists, eligible educators - can deduct unreimbursed trade-related travel expenses (mileage, transportation, lodging) on Schedule 1, but they cannot deduct a home office under those provisions. Form 2106 line 4 captures travel expenses only; line 4 does not include a home office line. Home office expenses for these four categories were also disallowed under TCJA and remain so under OBBBA.
The proper post-OBBBA path for W-2 employees is to negotiate an accountable plan home office reimbursement from the employer. Under Treas. Reg. §1.62-2, an accountable plan reimbursement:
The employer establishes a written plan, the employee submits substantiated home office expenses (square footage, allocable mortgage interest or rent, real estate taxes, utilities, insurance, depreciation), and the employer reimburses. The employer deducts the reimbursement as a Schedule A trade or business expense (Form 1120 or 1120-S for corporations; Schedule C for self-employed payers).
Three narrow exceptions modify or bypass the strict exclusive-use and principal-place-of-business tests.
Licensed daycare providers (or providers exempt from state licensing) use a time-and-space allocation rather than strict exclusive use. The space may be used for both daycare and personal/family purposes - exclusive use is NOT required. The business-use percentage is computed using Form 8829 Part I lines 4-7:
Example: Daycare from 7 AM to 6 PM weekdays plus 10 hours/week of prep across 50 weeks = (11 hours × 5 days × 50 weeks) + (10 hours × 50 weeks) = 2,750 + 500 = 3,250 hours. Total hours = 8,760. Hours factor = 37.1%. 1,200 of 2,000 home sq ft used for daycare. Space factor = 60%. Business-use = 37.1% × 60% = 22.3%. Apply 22.3% to indirect home expenses on Form 8829 Part II.
Taxpayers whose principal trade or business is the wholesale or retail sale of products may deduct expenses allocable to space in the dwelling unit used regularly to store inventory or product samples, provided the dwelling unit is the sole fixed location of the business. The exception:
This exception is heavily used by Etsy sellers, eBay resellers, Amazon FBA prep operators, online retailers, and product wholesalers without a separate physical location. Compute the deduction as business-use percentage (storage sq ft / total home sq ft) times indirect home expenses.
A separate free-standing structure on the same property as the dwelling (detached studio, garage, barn, workshop, ADU, detached office, greenhouse) qualifies as a home office if used exclusively and regularly for business - and the principal-place-of-business test does NOT apply. This is the easiest test category to satisfy:
Example: A physician who treats patients at a downtown hospital but also has a detached backyard studio used exclusively for medical research, writing, and continuing education can claim the studio as a home office under §280A(c)(1)(C), even though the hospital is the principal place of practice. The studio expenses are deductible.
For business-use percentage purposes, the separate structure's square footage is included in both the office area numerator and the total home area denominator (per Form 8829 instructions). Some practitioners argue the structure should be excluded from the denominator on the theory that a detached structure is not part of the dwelling unit, producing a higher business-use percentage; this aggressive position has not been universally accepted at examination and is risky to take without strong facts.
The most expensive non-obvious consequence of the regular method is depreciation recapture at home sale. Cumulative regular-method depreciation reduces the home's adjusted basis and is recaptured as unrecaptured §1250 gain when the home is sold.
Per IRC §1250 and Treas. Reg. §1.1250-3, when nonresidential real property is sold at a gain, the portion of the gain attributable to prior depreciation deductions is taxed as "unrecaptured §1250 gain" at a maximum rate of 25 percent (or the taxpayer's marginal rate if lower). Standard long-term capital gains rates (0%, 15%, 20%) do NOT apply to the depreciation-recapture portion of gain.
IRC §121 excludes up to $250,000 of gain ($500,000 MFJ) on the sale of a primary residence held for at least 2 of the past 5 years and used as the principal residence for at least 2 of the past 5 years. However, §121(d)(6) explicitly carves out depreciation recapture: the exclusion does NOT shelter the portion of gain attributable to depreciation allowed (or allowable) for periods after May 6, 1997, in connection with business use of the home.
Per §1016(a)(2) and Treas. Reg. §1.121-1(d), the basis of the home is reduced by depreciation "allowed or allowable" for the business-use period - regardless of whether the taxpayer actually claimed the depreciation. A taxpayer who used the regular method but did not actually claim depreciation in one or more years still has the basis reduction applied, and the recapture exposure is computed on the allowable amount.
Practical consequence: skipping the home office deduction does NOT avoid recapture - it just forfeits the current-year benefit. The correct response when you qualify for the home office deduction is to claim it every year (regular method) or use the simplified method to assign zero depreciation prospectively.
Taxpayer buys a home for $400,000 in 2018 (land basis $100,000, building basis $300,000). Uses 15% of the home for business under the regular method from 2018 through 2026 (9 years). Annual home office depreciation = $300,000 × 15% / 39 = $1,154. Cumulative depreciation over 9 years = $10,385.
In 2027, taxpayer sells the home for $700,000. Total gain = $700,000 - $400,000 = $300,000. Allocable to business use: 15% × $300,000 = $45,000 (not eligible for §121 exclusion). Of that $45,000, the depreciation recapture portion is $10,385 (cumulative depreciation), taxed at 25% maximum = $2,596 federal tax. The remaining $34,615 of business-allocable gain is long-term capital gain taxed at 15% (assumed bracket) = $5,192.
The personal-use portion of the gain (85% × $300,000 = $255,000) is fully sheltered by the $500,000 MFJ §121 exclusion. Total federal tax on the sale: $2,596 + $5,192 = $7,788.
The simplified method assigns zero depreciation, so years using the simplified method generate no recapture exposure. If the same taxpayer above had used the simplified method for all 9 years instead of regular, the recapture portion would be $0 (saving $2,596 federal tax). The total Schedule C deduction would have been $1,500 × 9 = $13,500 (simplified) vs $25,000 (regular at $1,154 depreciation + $1,624 indirect expense portion per year, 15% × $10,827 total indirect expenses). The regular method's higher current deduction ($11,500 over 9 years) generates $4,255 tax savings at 37% bracket - greater than the $2,596 recapture cost, so regular wins on a net basis. But if the taxpayer's bracket is lower or the holding period is shorter, the simplified method's recapture-free advantage can dominate.
Form 8829 (Expenses for Business Use of Your Home) is the regular method's reporting vehicle. The form has four parts:
Lines 1-3 establish the business-use percentage:
Lines 4-7 are the daycare time-and-space allocation (skip if not a daycare provider).
Lines 8-36 compute the deduction with the §280A(c)(5) tier structure:
Lines 37-42 compute the home office depreciation portion using:
Lines 43-44 establish the carryforward for next year's Form 8829:
The Form 8829 line 36 result flows to Schedule C line 30 as the allowable home office deduction for the year.
The home office deduction is one of the most over-feared, under-claimed deductions in the small-business tax universe. The persistent myth that "claiming the home office deduction triggers an IRS audit" is statistically unsupported - the IRS does not flag returns based on the home office deduction alone, and the standardized Form 8829 + simplified-method-checkbox routing make the deduction routine rather than exotic. The actual audit risk is failure to maintain substantiation (square footage measurements, business-use photos, proof of regular and exclusive use) when an audit happens to occur. The two most expensive errors I see at intake are: (1) the regular-method client who has been claiming depreciation for years without keeping a basis worksheet, then discovers at sale that the "allowed or allowable" rule under §1016 has recaptured a number they cannot prove. The IRS recomputed depreciation, using a higher implied business-use percentage that the client cannot now refute. Fix: maintain a vehicle-style annual basis worksheet showing starting basis, business-use percentage, annual depreciation, and ending basis - one page per year, all the way back to the start of regular-method use. (2) The simplified-method evangelist who switched from regular to simplified five years ago to "avoid recapture" - and now has $8,000 of cumulative pre-switch depreciation buried in the basis that WILL be recaptured at sale despite the switch. The simplified method does not erase pre-switch depreciation; it stops adding new depreciation going forward. Document pre-switch cumulative depreciation in a separate workpaper line; otherwise it gets "rediscovered" by the IRS at sale-year examination.
Daniel is a senior software engineer at a remote-first tech company in 2026. He works from home full-time in a dedicated 180 sq ft home office in his 1,500 sq ft Austin condo (12% business use). His employer pays him $145,000 in W-2 wages but provides no formal home office reimbursement - the company gives all remote employees a $100/month stipend included in regular paychecks, which Daniel notes is taxable wage income with full income tax and FICA withholding.
Daniel cannot deduct the home office on his personal return. Per OBBBA §70110, W-2 employees outside the four narrow §62(a)(2) above-the-line categories cannot claim a home office deduction. The deduction does not appear on Schedule A (miscellaneous itemized deductions are permanently disallowed), does not appear on Schedule 1, and does not appear on Form 2106 (which now covers only the four above-the-line categories' travel expenses). Daniel's $100/month stipend is taxable wages at his combined federal + state + FICA marginal rate of roughly 35%, leaving $65/month after tax.
Annual home office costs (informational only): Mortgage interest $24,000, property taxes $7,500, HOA $3,600, utilities $2,400, internet $900, insurance $1,200. Indirect total = $39,600. At 12% business use, Daniel's allocable home office cost is $4,752/year. If he were self-employed, this would generate $4,752 × (24% federal + 14.13% SE) = $1,812 of tax savings under the regular method (Form 8829), or $5 × 180 sq ft = $900 under the simplified method.
The accountable plan negotiation: Daniel approaches HR with a written proposal: convert the $100/month taxable stipend into a $400/month accountable plan home office reimbursement under Treas. Reg. §1.62-2, with substantiation provided monthly (square footage, allocable expense report). At $400/month, Daniel receives $4,800/year tax-free (no income tax, no FICA, no FUTA), worth $1,680/year more in after-tax cash than $400/month of taxable wages would be. The employer's cost is roughly the same as the existing stipend plus payroll taxes the employer saves on the reimbursement; the structural shift is purely tax characterization, not increased dollar outflow.
Outcome: The company agrees to the accountable plan structure for any employee with documented home office expenses of $300+/month. Daniel's effective compensation increases by $1,680/year without the employer paying more in gross dollars. The employer's accountable plan also benefits the company: home office reimbursements are deductible as business expenses on Form 1120, while stipends bundled into wages have the same expense character but trigger employer-side FICA matching. The accountable plan is the post-OBBBA path that every remote-first employer should be using.
Compare simplified vs regular side-by-side for your 2026 home office with the §280A(c)(5) gross income limit and OBBBA W-2 disallowance flag built in.
Open the Home Office Deduction Calculator →Use the simplified method. $5/sq ft up to 300 sq ft = max $1,500. No Form 8829, no basis tracking, no depreciation recapture exposure. Mortgage interest and real estate taxes stay 100% on Schedule A. Recordkeeping: square footage measurement + business-use proof. Run the Home Office Deduction Calculator to see the simplified math, and run the Self-Employment Tax Calculator for combined federal income tax + SE tax savings.
Compute both methods and compare. The regular method wins when (a) office is over 300 sq ft, (b) the home has high indirect expenses (mortgage interest + utilities + insurance + repairs), or (c) you plan to hold the home long enough that the cumulative regular-method advantage exceeds §1250 recapture at sale. Maintain an annual basis worksheet for depreciation. Use Form 8829 - read the calculator output's regular-method breakdown for line-by-line numbers.
You cannot deduct the home office on your personal return. OBBBA §70110 made the disallowance permanent. The correct response is to negotiate an accountable plan home office reimbursement from your employer under Treas. Reg. §1.62-2 - reimbursement at the actual cost of your office space is excluded from W-2 wages with no income tax or FICA. Many remote-first employers offer a stipend (which is itself taxable wages); push for the accountable plan structure instead. Read the calculator output for the "equivalent reimbursable amount" figure to use in your negotiation.
S-corp shareholder-employees: set up an accountable plan in the corporation under Treas. Reg. §1.62-2 and reimburse yourself. Partners: claim as unreimbursed partnership expense (UPE) on Schedule E Part II if the partnership agreement requires partners to pay home office. Daycare providers: use the time-and-space allocation under §280A(c)(4); the calculator estimates the deduction but Form 8829 Part I lines 4-7 has the exact formula. See the S-Corp Savings Calculator for combined entity + personal planning.
This guide is for educational and illustrative purposes only. It does not constitute tax, legal, or financial advice. The home office deduction interacts with the §121 home sale exclusion, the §1250 unrecaptured gain rules, the §199A QBI deduction, the §179 expensing limits for office equipment, the §163(h)(3) mortgage interest deduction, the OBBBA-extended SALT cap, daycare time-and-space rules, partnership / S-corp accountable plan rules, state income tax conformity issues, and the OBBBA §70110 permanent disallowance for W-2 employees - many of which this guide does not fully model. Consult a qualified tax professional before electing the regular method on a high-basis home where depreciation recapture exposure at sale is material. Tax laws are subject to change.