How does the home office deduction work, and should I use the regular or simplified method?

If you use part of your home regularly and exclusively for business, you can deduct expenses tied to that space — and you don't have to be a homeowner. The simplified method gives you $5 per square foot up to 300 square feet, so a maximum of $1,500, with almost no recordkeeping. The regular method instead deducts the business-use percentage of actual costs — mortgage interest or rent, utilities, insurance, repairs, and depreciation — which often produces a larger deduction for a sizable home office or higher-cost home, but requires tracking and Form 8829. Try both: if your business-use percentage of real expenses clearly beats $1,500, use the regular method; if your space is small or your records are thin, the simplified method is cleaner. Note the deduction is limited to your business income — it can't create a loss with the simplified method.