How do you figure the percentage of your home used for business?

What the publication says

The business percentage sits in the part of Publication 587 about actual expenses. The publication explains that you must divide the cost of running your home between personal and business use, and that the part you can use depends on two things: whether the expense is direct, indirect or unrelated, and the percentage of your home used for business. The percentage therefore does real work. It is the multiplier on every indirect expense, and on the business share of mortgage interest, real estate taxes and depreciation.

To find it, you compare the size of the part of your home that you use for business to your whole house. The publication says you can use any reasonable method and names two common ones: area, which is length times width of the business space divided by the total area of the home, and room count, which works only if the rooms in your home are all about the same size. It also points to lines 1 to 7 of Form 8829, or lines 1 to 3 of the worksheet at the end of the publication, as the place to record the figure.

The area method step by step

Measure the business space the way you would measure a floor for carpet: length times width, using the same units everywhere. If the space is not rectangular, split it into rectangles and add them. Then measure or look up the total area of the home. Use the same boundary for both numbers. If you count a finished basement in the home total, count it consistently, and do not include land, a detached garage you are not claiming, or other buildings.

The publication’s first example has an office of 240 square feet (12 feet by 20 feet) in a home of 1,200 square feet, so the office is 20% of the total area and the business percentage is 20%. That is the same arithmetic the calculator above performs. Enter your own two measurements and the calculator returns the percentage to two decimal places.

The room count method and when it fails

The second example in the publication uses one room out of ten rooms of about equal size, which gives 10%. The caveat matters. If your office is a small spare room and the rest of the home has large open living areas, counting rooms overstates the business share, and counting rooms in the other direction can understate it. The publication limits this method to homes where the rooms are all about the same size, and a reasonable method is the only requirement. When the rooms differ, the area method is the safer choice, and it is the one the calculator uses.

Whichever method you choose, use it for every indirect expense in the same year, and keep the numbers. The publication’s recordkeeping section says your records must show the part of your home you use for business.

What the percentage is applied to

Publication 587 sorts home expenses into three groups. Direct expenses are only for the business part of the home, such as painting or repairs in the office alone, and are deductible in full. Indirect expenses keep up and run the entire home, such as insurance, utilities and general repairs, and are deductible based on the percentage of the home used for business. Unrelated expenses are only for the parts of the home not used for business, such as lawn care or painting a room that is not used for business, and are not deductible. All of this is subject to the deduction limit discussed in the same section.

So the percentage does not touch direct expenses at all. A $300 repair inside the office is a direct expense and is deductible in full, while a $300 furnace repair that benefits the whole home is indirect, and at 20% only $60 goes into the home office computation. The publication uses the same logic in its own example, noting that a furnace repair benefits the entire home and that at 10% business use you can deduct 10% of the cost.

A worked example with two expenses

This example is not from the publication; it applies the publication’s rules. Suppose the office is 150 square feet and the home is 1,500 square feet. The business percentage is 10%. Annual utilities are $3,600 and homeowners insurance for the tax year is $1,800. The business part of utilities is $360 and the business part of insurance is $180. A $120 repair to paint only the office is a direct expense, so all $120 counts. The unrelated expense of mowing the lawn counts for nothing. Together the expenses that go into the computation are $660, before the deduction limit.

Part-year use and changes

The percentage compares space to space, not time to time. Time enters separately. Under part-year use, you cannot deduct expenses incurred during any part of the year you did not use your home for business. If you start using the office on July 1 and meet all the tests from then until year end, you consider only the expenses for the last half of the year. The simplified method has its own part-year averaging rule based on monthly square footage, which is a different calculation and is covered by the simplified vs regular home office deduction calculator.

Daycare is another special case. If a daycare space is used regularly but not exclusively, the publication multiplies the space percentage by the percentage of time the space is used for daycare. Its example takes a basement at 50% of the home and multiplies it by 34.25% of the time to reach 17.12% for indirect expenses.

What this does not tell you

A percentage tells you how much of an expense is allocated to the business. It does not tell you the space qualifies. The space still has to meet the tests in the Qualifying for a Deduction section, including exclusive and regular use. Whether to use actual expenses at all is a separate decision, because the simplified method does not use a percentage; it multiplies the allowable area, up to 300 square feet, by a prescribed rate. The self-employment tax calculator shows how a deduction affects your self-employment tax, and the standard vs itemized deduction calculator helps with the mortgage interest and tax side.

Sources

• IRS Publication 587, Business Use of Your Home (2025): Business Percentage (Figuring the Deduction, Using Actual Expenses). Read November 2, 2026.

Edition read: Publication 587 (2025), for use in preparing 2025 returns. Dollar figures and rates in the publication are for 2025; check IRS.gov/Pub587 and the instructions for Schedule C and Form 8829 for your tax year. This page summarizes the publication and does not replace it. Marked for human review.