Can I Write Off My Mortgage as a Business Expense?

You cannot write off your mortgage as a business expense, even if you run your business from home. Your mortgage payment is a personal living cost, and federal tax law treats personal costs and business costs as separate categories.¹ What you can do, if you are self-employed and have a dedicated workspace at home, is claim the home office deduction. That deduction moves a calculated percentage of your mortgage interest, property taxes, utilities, and insurance from the personal side of your return onto Schedule C, where it reduces both your income tax and your self-employment tax.

Why the Mortgage Itself Isn’t Deductible

Your monthly payment has two parts, and neither is a straightforward business write-off. The principal portion builds equity in a personal asset, so it is never deductible, period. The interest portion is deductible, but only as a personal itemized deduction on Schedule A. Property taxes work the same way: deductible as a personal itemized deduction, not as a business operating expense.

The home office deduction is the only mechanism that reclassifies a share of those personal costs as business expenses. It does not create a new deduction out of nothing. It takes a slice of what you were already paying and reports it in a more valuable place on your return.

Who Can Actually Claim It

The home office deduction is a tool for self-employed people who file Schedule C: sole proprietors, freelancers, independent contractors, and single-member LLCs taxed as sole proprietorships.

W-2 employees are mostly shut out. The Tax Cuts and Jobs Act of 2017 suspended the itemized deduction for unreimbursed employee business expenses for tax years 2018 through 2025,² and the One Big Beautiful Bill Act signed on July 4, 2025 extended many of those individual provisions.³ If you receive a W-2, assume you cannot claim a home office deduction.

Renters can claim it too. The IRS defines “home” broadly enough to include apartments, condos, mobile homes, and boats, and rent takes the place of mortgage interest in the calculation.⁴

What Qualifies as a Home Office

Your workspace has to pass two tests at the same time: exclusive use and regular use.⁵

Exclusive use means the space is used only for your business. A spare bedroom that doubles as a guest room doesn’t qualify, even if guests rarely come. A corner of the dining table where the family also eats dinner doesn’t qualify. The space does not need its own walls or door, but whatever area you designate has to be dedicated to the business and nothing else. Regular use means you work there consistently, not now and then.

You also have to show the home office is your principal place of business. The IRS looks first at where the most important work happens. A plumber who does the plumbing at client sites but runs scheduling, billing, and bookkeeping from a home office still qualifies, because administrative work done nowhere else counts.⁵ If no single location is clearly most important, the IRS looks at where you spend the most time. You also qualify if you regularly meet clients or customers at the home office in person.

Two narrow situations relax the exclusive use rule. A licensed in-home daycare for children, elderly adults, or people with disabilities can claim space that also serves personal purposes, with the deduction scaled by hours of actual use. And a retailer or wholesaler whose home is the business’s only fixed location can deduct space used to store inventory or product samples, even if that space is not exclusively business. A detached structure like a studio or shed used exclusively and regularly for business qualifies under an easier standard: it just has to be used in connection with the business and cannot be attached to the home.⁶

The Simplified Method

The easier calculation gives you $5 per square foot of dedicated office space, capped at 300 square feet. The maximum deduction is $1,500 a year.⁷

You skip Form 8829. You don’t track utility bills, insurance, or repair receipts. Your full mortgage interest and property taxes stay on Schedule A, because the simplified method doesn’t carve out a business portion. You also cannot claim depreciation under this method, and you cannot carry unused deduction forward to a future year.

The Regular Method

The regular method uses your actual housing expenses and almost always produces a bigger deduction, at the cost of more bookkeeping and a separate Form 8829 filed with Schedule C.⁸

First, work out your business-use percentage: office square footage divided by total home square footage. A 200-square-foot office in a 2,000-square-foot house gives you 10%.

Then apply that percentage to your indirect expenses, the ones that cover the whole house: mortgage interest, property taxes, homeowner’s insurance, utilities, and general maintenance. If you paid $12,000 in mortgage interest and your business-use percentage is 10%, $1,200 goes on Form 8829 as a business expense. The remaining $10,800 stays on Schedule A as a personal itemized deduction if you itemize.

Expenses that benefit only the office are direct expenses and fully deductible with no percentage haircut. A dedicated business phone line, repairs to the office itself, or paint for the office walls all count in full.

Depreciation isn’t optional under this method. The business portion of your home gets depreciated as nonresidential real property over 39 years using the straight-line method,⁵ starting from the lesser of your home’s adjusted basis or its fair market value when business use began, minus the land. Skipping the deduction doesn’t help you, because the IRS reduces your home’s basis by the depreciation you were allowed to take whether you actually took it or not.

The Income Cap

Your home office deduction generally cannot exceed the gross income from the business that uses the office. You can’t use it to create or deepen a business loss.⁹

If you use the regular method and some expenses get blocked by this cap, you can carry them forward to the next tax year. The simplified method has no carryover.⁹

What It Costs You When You Sell

Using the regular method creates a bill that doesn’t come due until the day you sell the house. The depreciation you claimed, or were entitled to claim, is recaptured as ordinary income at sale, taxed at a federal rate of up to 25%.¹⁰ The Section 121 exclusion that normally shelters up to $250,000 of gain ($500,000 for married couples filing jointly) on a primary residence does not shelter the recaptured amount.¹¹

If the home office is a room inside your house rather than a separate detached building, you don’t have to split the rest of the gain between business and personal. The Section 121 exclusion still covers all gain above the recaptured depreciation, assuming you meet the ownership and use tests.¹²

The simplified method avoids this entirely. No depreciation is claimed, no basis reduction happens, and there is nothing to recapture at sale.

Picking Between the Two Methods

You can switch methods from one year to the next, but not within the same tax year.

For small offices with modest housing costs, the simplified method’s $5 per square foot often lands close to what the regular method would produce, without the paperwork.
For larger offices with substantial mortgage interest, insurance, and utilities, the regular method usually beats the $1,500 cap by a wide margin.
If you plan to sell within a few years, the simplified method sidesteps depreciation recapture and may save more at sale than the regular method saves you now.
If your business income swings year to year, the regular method’s carryover protects deductions that would otherwise be lost in a lean year.

1
Office of the Law Revision Counsel. 26 USC 262 – Personal, Living, and Family Expenses
2
Congress.gov. Expiring Provisions in the Tax Cuts and Jobs Act
3
Internal Revenue Service. One, Big, Beautiful Bill Provisions
4
Internal Revenue Service. How Small Business Owners Can Deduct Their Home Office From Their Taxes
5
Internal Revenue Service. Publication 587 – Business Use of Your Home
6
Office of the Law Revision Counsel. 26 USC 280A – Disallowance of Certain Expenses in Connection With Business Use of Home
7
Internal Revenue Service. Simplified Option for Home Office Deduction
8
Internal Revenue Service. Form 8829 – Expenses for Business Use of Your Home
9
Internal Revenue Service. Topic No. 509, Business Use of Home
10
Office of the Law Revision Counsel. 26 U.S. Code 1250 – Gain From Dispositions of Certain Depreciable Realty
11
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
12
Internal Revenue Service. Publication 523 – Selling Your Home