The home office deduction allows self-employed individuals and business owners to deduct a portion of their home expenses, such as rent, mortgage interest, utilities, and insurance, based on the percentage of the home used exclusively and regularly for business. There are two ways to calculate: the simplified method, which allows a flat $5 deduction per square foot of office space (up to 300 sq ft, max $1,500); and the regular method, which calculates the actual percentage of home costs attributable to the office. The space must be used exclusively for business. A guest room that doubles as an office doesn't qualify. For renters and homeowners alike, this deduction can meaningfully reduce taxable income if the workspace meets IRS requirements.