The Home Office Deduction: How Real Estate Investors Working from Home Can Write Off Their Workspace

If you manage rental properties, short-term rentals, or house flips from your home—even part-time—you may be eligible for one of the most overlooked tax deductions: the home office deduction.

Whether you're screening tenants, handling Airbnb bookings, managing contractors, or coordinating closings, if that work happens from your home office, you may qualify to deduct a portion of your housing costs — and save thousands each year.

Who Qualifies for the Home Office Deduction?

To claim the deduction, part of your home must be used:

• Exclusively and regularly for your real estate business

• As your principal place of business, or where you conduct admin, bookkeeping, or deal-related tasks

It doesn’t have to be a full room—it could be a designated section of a bedroom, garage, or finished basement. But it cannot double as a personal space like a guest room or gym.

This deduction is especially useful for:

• Landlords managing long-term rentals

• STR hosts handling guest communications and logistics

• Flippers overseeing budgets, materials, and contractors from home

Note: W-2 employees generally don’t qualify due to IRS restrictions unless they also run a separate business.

Two Ways to Claim the Deduction

1. Simplified Method

• $5 per square foot, up to 300 sq ft

• Max deduction: $1,500

• No tracking expenses — just square footage

2. Actual Expense Method

Deduct a percentage of eligible home expenses based on the business-use percentage of your home. Eligible costs include:

• Rent or mortgage interest

• Property taxes

• Homeowners insurance

• Utilities

• Internet

• Repairs & maintenance (only the business-use portion)

• Depreciation (recaptured later if you sell your home)

This method usually yields a larger deduction but requires more recordkeeping.

Practical Example

Tony owns three long-term rentals and runs his business from a dedicated 250-square-foot space in his 2,500-square-foot home. His total annual home expenses (mortgage interest, utilities, property taxes, etc.) are $38,000.

Using the actual method, 10% of his home is for business, so he deducts $3,800—over double the $1,250 he would have received using the simplified method.

Key Considerations

• Depreciation is required with the actual method and must be recaptured when selling the home

• Photos, floor plans, and documentation help support your deduction

• You can switch methods each year, depending on which is more favorable

Final Thoughts

If you're actively managing your real estate business from home, don’t miss out on this deduction. Even a small home office can yield big tax savings when used properly.

Want to know which method is best for you?

Book a free strategy call and we’ll walk you through your unique setup.