How do S-Corp owners deduct a home office?

S-Corp owners don't deduct a home office on their own tax return. The S-Corp reimburses them for it.

Once you elect S-Corp status and work in the business, you are an employee of your company. Most employees, including an owner-employee of an S-Corp, haven't been able to deduct unreimbursed work expenses since 2018, and the 2025 tax law made that permanent, so the home office you claimed on Schedule C has no place on your personal return. The fix is an accountable plan: the company pays you back for the office's share of your actual home costs, tax-free to you, and deducts it.

Who this applies to

• Owners of an LLC or corporation taxed as an S-Corp who work from a home office and take a W-2 salary.
• Owners who recently elected S-Corp status and used to claim the home office on Schedule C with Form 8829 or the simplified method.
• Homeowners and renters alike. The costs differ, but the route is the same.

Who it doesn't

• Sole proprietors and single-member LLCs taxed as sole proprietorships. They still deduct the home office on Schedule C, covered below for comparison.
• Partners in a partnership. Partners figure the deduction differently, which this article doesn't cover.
• Owners who work from a company office or coworking space the business pays for and only take calls at home. The home office tests are hard to meet when the company has another place for that work.

Why the deduction moves to the company

The Internal Revenue Code generally bars deductions for using your home. Section 280A(c)(1) carves out an exception for space used regularly and exclusively for business, and an S-Corp owner's office can still fit that exception. What changed is who gets to claim it.

As an employee, a home office is an unreimbursed employee expense, which is a miscellaneous itemized deduction. Section 67(h) disallows those deductions for every tax year beginning after December 31, 2017, and the 2025 tax law (Public Law 119-21) removed the old 2025 end date. The flowchart in IRS Publication 587 puts it plainly: if you use part of your home as an employee, there is no deduction.

The verdict: on your Form 1040, the home office deduction is zero. On the company's return, it's a deductible reimbursement.

Does your space qualify?

The tests don't get easier because the company is paying. The reimbursement can only cover an expense that would be deductible, so the office has to pass section 280A.

1. Exclusive use. A specific area used only for the business, so a guest room that doubles as an office fails. Publication 587 has two narrow exceptions, each with its own conditions: storing inventory or product samples, and certain daycare facilities.
2. Regular use. Ongoing use, not occasional. Publication 587 says incidental or occasional use isn't regular use.
3. Principal place of business, a place you meet clients, or a separate structure. A home office counts as your principal place of business if you use it for administrative or management work, such as billing and recordkeeping, and there's no other fixed location where you do substantial amounts of that work. A separate structure not attached to the home, such as a detached studio, can also qualify when it's used in connection with the business.
4. Convenience of the employer. This one applies only to employees, which now includes you. Section 280A(c)(1) requires that the exclusive use be for the convenience of your employer, not just your preference.

For a one-person S-Corp, the fourth test is about facts on paper. If the company has no office and the work has to happen somewhere, document that in the plan and the corporate records.

Simplified method vs regular method on Schedule C

Before the election, a sole proprietor has two ways to figure the deduction.

The simplified method. Under Rev. Proc. 2013-13, you multiply the office's square footage, up to 300 square feet, by $5, so the most it can produce is $1,500 a year. You claim no depreciation, take mortgage interest and property taxes in full on Schedule A if you itemize, and skip Form 8829.

The regular method. You figure the office's percentage of the home, usually by square footage, and apply it to actual costs: rent, or mortgage interest and property taxes, plus insurance, utilities, repairs and depreciation if you own. You report it on Form 8829, and the result goes to Schedule C, line 30.

You can choose either method each year. The regular method usually wins when housing costs are high or the office is large, and it means more records.

Why the simplified method doesn't carry over

Rev. Proc. 2013-13 says the safe harbor doesn't apply to an employee who receives advances, allowances or reimbursements for the home office. It's a way to figure your own deduction, not a reimbursement rate.

Treasury regulations let the IRS set optional rates in place of actual costs for vehicle mileage and for travel away from home. There is no equivalent for home offices. The reimbursement is built from actual costs, documented under the accountable plan rules.

How the S-Corp reimbursement works

1. Adopt the plan. The company adopts an accountable plan that covers home office costs.
2. Measure the office. Office square footage divided by the home's total square footage, or another reasonable method from Publication 587.
3. Total the home costs. Rent, or mortgage interest and property taxes, plus homeowners or renters insurance, utilities and repairs.
4. Submit and get paid. You send the company the calculation with the bills behind it, and it reimburses the business share. The regulation's fixed date safe harbor treats substantiation within 60 days of paying the expense as timely, so many owners do this monthly or quarterly.

Two details matter for homeowners. If the company reimburses the business share of mortgage interest and property taxes, keep that share off your Schedule A so the same dollar isn't deducted twice. And decide before the plan starts whether it includes depreciation, covered below.

A worked example

How it changes for an S-Corp owner

Three things change after the election. The deduction leaves your return and becomes a company reimbursement, and the $5 simplified method stops being an option. You also pick up the convenience-of-the-employer test.

The home office usually runs through the same plan as mileage on a personal car, phone and internet. The vehicle reimbursement and meals work the same way. Setting the plan up is part of what comes after the election.

Depreciation and selling your home

For homeowners, depreciation on the office is a real number. Publication 587 treats the business part of a home as nonresidential real property, depreciated straight line over 39 years.

The catch comes at sale. Section 121 lets you exclude up to $250,000 of gain on a main home, or $500,000 for certain joint filers, and the regulations don't require you to split the gain between home and office when the office is inside the house. But section 121(d)(6) excludes none of the gain equal to depreciation after May 6, 1997, and the regulation's own example taxes that part as unrecaptured section 1250 gain.

That's why including depreciation in an S-Corp reimbursement is a judgment call. It adds to the reimbursement today, and it can cost you when you sell.

The bottom line

An S-Corp owner can't deduct a home office on their own return for 2026 or later. The company reimburses it under an accountable plan, based on actual costs, and deducts it.

The office still has to be used regularly and exclusively for the business, and for the convenience of the company. Documentation does the work: the square footage, the bills, and a plan adopted before the reimbursements start.

If you elected S-Corp status and still treat the home office the Schedule C way, the 20-minute intro call is the place to start.