Home Office Deduction Basics for Side Hustlers
By Cedar & Ledger
If you run a side business from home, part of your home costs may be deductible. The rules are strict, so it helps to know the basics before tax season.
This is general information, not tax advice. The deduction has rules and limits; check IRS Publication 587 or ask a tax professional. Example numbers are made up.
Quick checklist
- ☐ Check that the space is used only and regularly for business
- ☐ Measure the space and your whole home
- ☐ Pick the simplified or regular method
- ☐ Keep a photo and a note of how the space is used
- ☐ Note that W-2 employees generally can't take it on a federal return
Step 1: Does your space qualify?
The IRS generally requires the space to be used regularly and only for your business, and to be your main place for that business. A desk in the corner of a guest room you only use for work can count. A kitchen table you also eat at usually doesn't.
Step 2: Choose a method
Simplified method: $5 per square foot of office space, up to 300 square feet (a maximum of $1,500). Little record keeping.
Regular method: the business share of actual costs like rent or mortgage interest, utilities, insurance and repairs, based on the percentage of your home used for business. More records, and sometimes a bigger deduction.
| (Made-up example) | Simplified | Regular |
|---|---|---|
| Office size | 120 sq ft | 120 of 1,200 sq ft = 10% |
| Yearly home costs | n/a | $18,000 |
| Deduction | 120 × $5 = $600 | 10% × $18,000 = $1,800 |
Step 3: Know the limits
The deduction generally can't be more than your business profit. If your side hustle earned $400 after other expenses, that limits what you can deduct this year.
Step 4: Keep records
Save a floor measurement, a photo of the space and your home bills if you use the regular method.
Tools that help
The 2026 Tax Prep Organizer has a page for business expenses and home office details to hand to your tax preparer. Our self-employed tax deductions checklist covers other common deductions.
Common questions
Can I take it if I'm an employee working from home? Generally not on your federal return; it's for self-employed work. Some states differ.
Can I switch methods each year? Generally yes. Check the current rules for your situation.
Does a renter qualify? Yes, renters can use either method if the space qualifies.
Related template: 2026 Tax Prep Organizer. Also see: Side Hustle Income & Expense Tracker
See all Cedar & Ledger templates
Try the free side hustle tax set-aside calculator →
Frequently asked questions
What does this guide cover?
Check the regular-and-only use rule, compare the simplified $5 per square foot method with actual costs and keep records. Example numbers.
What are the steps?
1) Does your space qualify?; 2) Choose a method; 3) Know the limits; 4) Keep records.
Step 1: Does your space qualify?
The IRS generally requires the space to be used regularly and only for your business, and to be your main place for that business. A desk in the corner of a guest room you only use for work can count. A kitchen table you also eat at usually doesn't.
Do I need a template to do this?
No. A notebook or a sheet you build yourself works fine. Cedar & Ledger also sells spreadsheet templates (I'd earn from a purchase); see the template box at the top of this page.
Is this financial advice?
No. It's general information with example numbers only, not financial, tax, legal or medical advice. Use your own numbers and check anything important with a qualified professional or the official source.