“Can I deduct my home office if I’m on job sites all day?” Often, yes. The IRS has a test written for exactly this kind of business, and one of the examples in Publication 587 is a self-employed plumber. What trips contractors up is rarely the job-site part. It is the word “exclusively,” and the paperwork that proves it.
The test that fits the trades
For most businesses, the space has to be used as your principal place of business or as a place where you meet customers, or be a separate structure (Pub 587 adds storage, rental and daycare uses). For someone whose work happens at customers’ houses, the principal place of business usually fits through what Pub 587 calls administrative or management activities. Your home office qualifies if:
The IRS lists billing customers, keeping books and records, ordering supplies, setting up appointments, and forwarding orders or writing reports as examples. That is most of what a contractor does at a desk.
Pub 587’s plumber spends most of the time installing and repairing plumbing at customers’ homes and offices, writes estimates and records of completed work at the customers’ premises, and pays a local bookkeeping service to bill customers. The plumber also has a small office at home used exclusively and regularly for phoning customers, ordering supplies and keeping the books. The IRS’s conclusion: that office qualifies as the principal place of business, and having another company do the billing does not change it.
What does not disqualify you
Pub 587 says these do not take away the office’s status as your principal place of business:
Where the test fails is a second fixed location where the real paperwork happens. Say a remodeler rents a small shop with a desk and does the books there two evenings a week. That shop is a fixed location with substantial administrative work, and the home office no longer meets the principal place of business test.
Exclusive and regular: the two words that sink most claims
Exclusive use means “a specific area of your home only for your trade or business.” It can be a room or another separately identifiable space, and it “does not need to be marked off by a permanent partition.” If you use the area for business and personal purposes, it fails. Pub 587’s example is a den where an attorney writes briefs and the family also relaxes: no deduction.
Regular use means business use on a regular basis; “incidental or occasional business use is not regular use.” So the kitchen table where you also eat dinner fails, while a corner of a spare room holding only the desk, the files and the printer can pass if nothing personal happens there. The IRS allows two exceptions to the exclusive-use rule, a daycare facility and the storage of inventory or product samples; every other business space must meet it.
The garage, the shed and the tools
A detached building gets its own rule. You can deduct expenses for “a separate free-standing structure, such as a studio, workshop, garage, or barn,” used exclusively and regularly for your business, and it does not have to be your principal place of business. A detached shop that holds only the trailer, the tools and the job materials can qualify on that alone.
The storage exception is narrower than it sounds. It covers inventory or product samples of a business that sells products at wholesale or retail, where the home is the only fixed location; Pub 587’s example is someone selling mechanics’ tools at retail. A contractor storing the tools he works with is not selling them, so a bay of an attached garage gets no exception: it has to meet the exclusive-use and regular-use tests like any other part of the house, on top of one of the qualifying uses above. The family car parked there overnight breaks it.
The equipment itself is a separate question. Pub 587 says depreciation and the section 179 deduction for furniture and equipment you use in your home for business “are available whether or not you qualify to deduct expenses for the business use of your home.” The desk, the laptop and the plan printer are deductible either way; What Can You Deduct? covers how.
Two ways to figure it
The simplified method. Multiply $5 by the square feet used for business, up to 300 square feet, so the most it can be is $1,500. You deduct no actual home expenses and no depreciation on the home; the IRS treats that depreciation as zero for the year. Mortgage interest and real estate taxes are treated as personal expenses, so if you itemize they go on Schedule A in full. If you start partway through the year, you use the average square footage per month, and a month with fewer than 15 days of business use counts as zero.
The regular method, on Form 8829. Work out the business percentage: the office’s area divided by the home’s, or rooms divided by rooms if they are about the same size. Direct expenses, such as painting only the office, are deducted in full. Indirect expenses for the whole home, including insurance, utilities, general repairs, rent and a security system, are deducted by the percentage. If you own, you also depreciate the business part of the home over 39 years, starting from the lesser of its adjusted basis or its fair market value when the office went into use, land left out. For an office first used for business after May 12, 1993 and before 2025, the Form 8829 instructions give 2.564% a year.
Either way, the deduction cannot create or increase a loss from the business. Under the regular method the excess carries forward to the next year you use actual expenses; under the simplified method it is simply lost. You choose the method each year, and a year’s choice, once made on a timely filed original return, is final.
A worked example
Say an electrician uses a 10-by-12-foot room only as an office in a 1,600-square-foot house she owns. That is 120 square feet, or 7.5%. Her year’s utilities are $3,600, homeowners insurance $1,800 and general repairs $1,000. The adjusted basis of the house without the land is $240,000, below its market value, and the office went into use before 2025. Mortgage interest is $9,000 and property taxes $3,500.
| Line | Simplified | Regular |
|---|---|---|
| 120 sq ft × $5 | $600.00 | – |
| Utilities, insurance, repairs ($6,400 × 7.5%) | – | $480.00 |
| Depreciation ($240,000 × 7.5% × 2.564%) | – | $461.52 |
| Mortgage interest and taxes ($12,500 × 7.5%) | – | $937.50 |
| Home office deduction on Schedule C | $600.00 | $1,879.02 |
The regular column is bigger, but read it carefully. If she itemizes, the $937.50 of interest and taxes is not a new deduction: under the simplified method all $12,500 stays on Schedule A, so the income-tax gain is mostly $941.52 of operating costs and depreciation against $600 (moving the $937.50 to Schedule C does lower the profit her self-employment tax is figured on). If she takes the standard deduction, the Form 8829 instructions have her claim the business share of the interest and taxes on the form itself, so the full $1,879.02 compares with $600. Either way, the depreciation comes back when she sells (below), and which method wins on her return is a question for her preparer.
What a home office changes elsewhere
Where it goes, and what to keep
A sole proprietor reports the whole deduction on Schedule C, line 30, using Form 8829 for the regular method or the Simplified Method Worksheet in the Schedule C instructions. Pub 587’s flowchart ends at “no deduction” for space used as an employee, so if you are paid wages by your own corporation, ask your preparer how the office should be handled.
Pub 587 says your records must show the part of the home you use, that you use it exclusively and regularly as your principal place of business, and the depreciation and expenses. Keep them as long as they matter for any tax law, usually the later of 3 years from the return’s due date or filing date, or 2 years after the tax was paid, and keep the records that prove the home’s basis: purchase, improvements and depreciation. A habit that covers most of it: once a year, measure the office, take a photo of it, and file both with the year’s utility and insurance bills. How Long to Keep Business Records has the rest of the schedule.
General information, not legal or tax advice. Rules change and vary by state; check with the agency named above or a professional for your situation.