Self-Employed Tax Deductions: Home Office & Mileage

Most self-employed tax advice about deductions is about finding more of them. This guide is about the two that already apply to almost everyone who works from home and drives for work — and that people routinely under-claim because the IRS gives you a choice of method for each one, and the wrong guess can quietly cost hundreds or thousands of dollars a year. For the home office deduction, the choice is simplified ($5 per square foot) versus actual expenses (a prorated share of your real home costs). For vehicle mileage, it's the standard rate (72.5 cents per mile for 2026) versus actual expenses (a prorated share of your real vehicle costs). Below is how each pair works, which one tends to win and when, two calculators to run your own numbers, and what the IRS actually wants you to have on hand if it asks.

The home office deduction: two methods, one form

To claim anything here, the space has to pass the IRS's "regular and exclusive use" test — a room or defined area used only for business, not a kitchen table that also hosts family dinners. Once that's true, you pick one of two ways to value it, and you can switch between them from year to year.

The simplified method multiplies your qualifying office square footage by a flat $5, capped at 300 square feet — a maximum deduction of $1,500 a year, no matter how large the actual space is. There's no receipt-tracking, no depreciation schedule, and critically, no depreciation recapture to deal with when you eventually sell the home. The tradeoff: if your real costs would justify a bigger number, the simplified method leaves that money on the table, and any excess above your business income can't be carried forward to next year.

The actual expense method takes your real annual home costs — mortgage interest or rent, utilities, insurance, homeowners' association fees, repairs — and prorates them by the percentage of your home's square footage the office occupies. It usually produces a bigger number for anyone with a sizable mortgage or high utility bills, and unlike the simplified method, unused deductions can carry forward to future years if you're limited by business income this year. The cost is real recordkeeping, a depreciation calculation, and depreciation recapture (extra tax) when you sell the home — the simplified method's biggest practical advantage.

Both methods cap the deduction at your gross income from the business use of the home, minus your other business expenses — neither one can push a home office into creating or enlarging a business loss.

When actual expenses win. Run the calculator's own defaults — a 200-square-foot office in a 2,000-square-foot home with $20,000 in total annual home expenses, at a 22% marginal rate — and the simplified method caps out at $1,000 (200 × $5) while the actual method comes out to $2,000 (10% of $20,000). The calculator recommends the actual method, worth an estimated $440 in tax savings at that rate. That's a common shape: a real mortgage or rent payment plus utilities usually dwarfs $5 a square foot once the office is a meaningful share of the home.

When simplified wins anyway. Drop the numbers to a smaller, cheaper home — a 150-square-foot office in a 1,000-square-foot home with only $4,000 in total annual expenses (a paid-off mortgage with low property tax and utilities, say) — and the math flips: actual expenses come out to just $600 (15% of $4,000), while simplified still delivers $750. At that point simplified isn't just simpler, it's the bigger number too, and it comes with no depreciation recapture to think about years from now when the home sells.

Vehicle mileage: 72.5 cents a mile vs. your actual costs

For tax year 2026, the IRS optional standard mileage rate for business use of a vehicle is 72.5 cents per mile, up 2.5 cents from 70 cents in 2025 — see the current rate and prior years for the full table. That rate already bakes in gas, maintenance, insurance, and depreciation into one number per mile, which is what makes it so easy to use: track your business miles, multiply, done.

The alternative, actual expenses, totals everything it really costs to run the vehicle for the year — gas, insurance, repairs, registration, and either depreciation or lease payments — then deducts the business-use percentage of that total, based on business miles divided by total miles driven.

One rule matters more here than in the home office decision: if you want the option to use the standard mileage rate on a given vehicle, you generally have to choose it in the first year that vehicle is used for business. Start with actual expenses in year one and you typically can't switch to standard mileage for that same vehicle later — so this is a decision worth making deliberately at the start, not something to default into.

When standard mileage wins. The calculator's own defaults — 12,000 business miles out of 15,000 total, $6,000 in total vehicle costs for the year, 22% marginal rate — favor the standard rate clearly: 12,000 × 72.5¢ is $8,700, against an actual-expense figure of just $4,800 (80% of $6,000). The calculator recommends standard mileage, worth an estimated $1,914 in tax savings. This is the typical result for an efficient, moderately priced vehicle driven a lot for work: the flat per-mile rate outruns real costs that stay modest.

When actual expenses win. Swap in a pricier vehicle — 10,000 business miles out of 12,000 total, but $15,000 in total vehicle costs (a newer SUV with a real lease payment or fast depreciation) — and actual expenses jump to $12,500 (83.3% of $15,000), well past the standard-rate figure of $7,250 (10,000 × 72.5¢). Now actual expenses are the better claim, worth roughly $2,750 in estimated tax savings versus $1,595 under standard mileage. The pattern holds generally: cheap-to-run vehicles favor the standard rate, expensive vehicles favor actual costs, and mileage alone doesn't decide it — cost per mile does.

Also worth knowing: "business miles" doesn't include your regular commute from home to a fixed workplace, which the IRS treats as personal driving either way. If your home office is your principal place of business, trips from home to client sites or other business locations generally do count.

How to decide without guessing

Both deductions follow the same underlying logic, so the same instinct applies to each: run both methods and take the larger number, unless a specific circumstance makes the smaller one worth it anyway.

For the home office, lean simplified if your total home costs are modest, your office is a small share of the home, or you'd rather skip the depreciation-and-recapture math entirely — even at a slightly smaller deduction. Lean actual if your mortgage interest or rent and utilities are substantial and the office occupies a meaningful chunk of the home; the gap in deduction size usually outweighs the extra bookkeeping.

For mileage, lean standard if your vehicle is inexpensive to run and you drive a lot for business — the flat rate rewards high mileage on a cheap-to-maintain car. Lean actual if the vehicle itself is expensive (a new purchase, a lease, or a high-depreciation model) even at moderate mileage, since real costs on an expensive vehicle routinely beat a flat per-mile number. And remember the standard-mileage election has to happen in year one for that vehicle — decide before you file, not after.

Either deduction lowers net profit, which lowers two different tax bills at once: ordinary income tax and self-employment tax. If you want to see that second effect directly, the Self-Employment Tax Calculator shows what a lower net-profit number does to the 15.3% Social Security-and-Medicare bill specifically — and once you've locked in your home office and mileage numbers for the year, it's worth re-running the Tax Set-Aside Calculator with your updated profit figure, since a bigger deduction usually means a smaller percentage needs to come out of every invoice going forward.

Record-keeping the IRS actually expects

Neither deduction is a number you get to assert — both require records that would hold up if the IRS ever asked.

For the home office, that means being able to show the square footage of the office and the home (a rough floor plan or a room-by-room measurement is fine), and that the space genuinely meets the regular-and-exclusive-use test. If you're using actual expenses, keep the underlying bills — mortgage interest statements, utility bills, insurance, repairs — the same way you'd keep records for any other business expense.

For mileage, the IRS's own guidance on car expenses is specific about what "adequate records" means: you need to be able to "prove the time, place, and business purpose of your travel" for every trip you're deducting. In practice that's a log — a notebook, spreadsheet, or mileage app — with the date, where you went, why it was for business, and the miles driven, kept close to when the trip happened rather than reconstructed from memory in April. A single odometer reading at the start and end of the year isn't enough on its own if the IRS wants to see how you split business from personal use.

What this guide doesn't cover

This is US federal tax guidance only — no state-specific rules, and neither deduction applies to a W-2 employee working from home; unreimbursed employee business expenses, including a home office, have not been federally deductible since the 2017 tax law changes took effect. Everything above is an estimate for planning purposes, not personalized tax advice, and the "tax saved" figures from both calculators are simplified: they apply a single marginal rate you supply and don't model bracket phase-ins, the Additional Medicare Tax, state taxes, or how either deduction interacts with the rest of your return. Confirm your own numbers with a tax professional or the IRS's own instructions before you file, and keep the underlying records regardless of which method you choose — a bigger deduction is only as good as your ability to back it up.

Methodology & sources

The home office figures follow the IRS's simplified option exactly as published: $5 per square foot, capped at 300 square feet ($1,500 maximum), against an actual-expense method that prorates real home costs by office-to-home square footage — both capped at gross income from business use of the home. The mileage figures use the IRS's 2026 optional standard mileage rate of 72.5 cents per business mile against an actual-expense method that prorates real vehicle costs by the business-use percentage of total miles driven. Both calculators simply return whichever method produces the larger number, matching the comparisons above exactly.

Sources: the IRS's Simplified Option for Home Office Deduction page, the IRS Newsroom's 2026 business standard mileage rate announcement, and IRS Publication 463 (Travel, Gift, and Car Expenses) for the recordkeeping standard referenced above.