Home Office Deduction for Medical Practice Owners: Are You Missing This Write-Off?

By Brian Giesecke, CPA/EA | Giesecke Advisory

Title tag: Home Office Deduction for Medical Practice Owners | Tax Guide Meta description: Medical practice owners who do admin work from home can claim the home office deduction on IRS Form 8829. Learn who qualifies, how to calculate it, and common mistakes.

Do you do any work from home? Charting, admin calls, bookkeeping, scheduling, planning?

If so, you might be sitting on an unclaimed deduction.

The home office deduction is one of the most commonly overlooked — and most commonly done wrong — tax benefits for independent medical practice owners. Sole proprietors claim it on IRS Form 8829 (Expenses for Business Use of Your Home). S-corp owners can access the same benefit through an accountable plan reimbursement under IRC Section 62(a)(2)(A).

Either way... the money is real, and most practice owners leave it on the table.

Who Qualifies for the Home Office Deduction?

The home office deduction is available to self-employed individuals and pass-through business owners (S-corp, partnership, sole proprietorship) who meet two tests under IRC Section 280A.

Test 1: Regular and exclusive use. The space must be used regularly for business AND exclusively for business. Your kitchen table where you sometimes answer emails doesn't count. A spare bedroom converted into a dedicated office does.

Test 2: Principal place of business OR administrative/management activities. Even if your main clinical work happens at the practice, your home office qualifies if you use it for administrative or management tasks — and you don't have another fixed location where you primarily perform that work.

So if you regularly do charting, review financials, handle insurance paperwork, or run your practice's operations from a dedicated space at home... you likely qualify.

Most physicians we work with meet these criteria. They just never realized they could claim it.

Simplified vs. Actual Expense Method: Which Should You Use?

The IRS offers two methods for calculating your home office deduction. The right choice depends on your home expenses and office size.

Simplified method: Deduct $5 per square foot, up to 300 square feet. That's a maximum $1,500 deduction per year. Minimal recordkeeping required — no need to track individual housing expenses.

Actual expense method (IRS Form 8829): Calculate your home office percentage by dividing your office square footage by total home square footage. Apply that percentage to actual home expenses:

• Mortgage interest or rent
• Real estate property taxes
• Utilities (electric, gas, water, internet)
• Homeowner's or renter's insurance
• Repairs and maintenance
• Depreciation of the home (if you own, calculated on IRS Form 4562)

Example: A 200 sq ft home office in a 2,000 sq ft home = 10% business use. If total annual home expenses are $30,000, the actual expense method yields a $3,000 deduction — double the simplified method's maximum.

For most medical practice owners with a dedicated home office, the actual expense method produces a significantly larger deduction. The simplified method works best when the office is small or you want zero paperwork.

S-Corp Home Office Deduction: How the Accountable Plan Works

If your medical practice is structured as an S-corporation, you can't claim the home office deduction directly on your personal tax return.

Instead, the S-corp reimburses you for home office expenses under an accountable plan — as defined by IRS Publication 463 and IRC Section 62. The reimbursement is a tax-free payment to you and a deductible business expense for the corporation.

The economic benefit is the same. The mechanism is just different.

To set this up properly, your S-corp needs a written accountable plan policy, and expenses must be substantiated with documentation. This is something your tax advisor can help you establish — it usually takes about 30 minutes.

Common Home Office Deduction Mistakes to Avoid

Not having a dedicated space. The IRS requires exclusive use. A room with a door that's only used for business is ideal. A corner of your living room where the kids also do homework won't hold up.

Not tracking actual expenses. If you choose the actual expense method, you need records of mortgage interest, utilities, insurance, taxes, and maintenance. Keep receipts or bank statements organized by category.

Forgetting about it entirely. This is the most common mistake we see. Many practice owners assume they can't take a home office deduction because patient care happens at the clinic. But the administrative activities test under IRC Section 280A specifically covers this scenario.

Over-claiming or inflating square footage. Don't get creative with the math. The space has to actually be used regularly and exclusively for business. The IRS has seen every trick — keep it honest and documented.

Ignoring depreciation recapture. If you own your home and use the actual expense method, you're claiming depreciation on a portion of your home. When you sell, you may owe depreciation recapture tax at 25% on the amount claimed. This isn't a reason to skip the deduction — it's a reason to plan for it.

Key Takeaways

• The home office deduction allows medical practice owners to deduct a portion of housing costs — including mortgage interest, rent, utilities, insurance, property taxes, and depreciation — if a dedicated space is used regularly and exclusively for practice administration
• The simplified method provides up to $1,500 ($5/sq ft x 300 sq ft) with no receipts required; the actual expense method on IRS Form 8829 often yields 2-3x more
• S-corp practice owners use an accountable plan reimbursement instead of Form 8829 — the S-corp pays you tax-free and deducts the expense
• Medical practice owners who do admin, charting, or management work from home typically qualify under the administrative activities test of IRC Section 280A, even if all patient care happens at the clinic
• The space must pass the "regular and exclusive use" test — a dedicated room with a door used only for business is the gold standard

FAQ

Can S-corp medical practice owners take the home office deduction? S-corp owners cannot claim the home office deduction directly on their personal tax return (IRS Form 8829 is for sole proprietors). However, the S-corp can reimburse you for home office expenses under an accountable plan per IRC Section 62(a)(2)(A). This creates a tax-free reimbursement to you and a deductible business expense for the corporation. The tax benefit is equivalent — you just need a written accountable plan policy and documented expenses.

Does claiming the home office deduction increase audit risk for doctors? The home office deduction itself does not significantly increase audit risk, according to IRS data. What triggers scrutiny is over-claiming — deducting a space that isn't truly exclusive, inflating square footage, or claiming expenses without documentation. As of 2024, the IRS audit rate for small businesses remains under 1%. Keep honest records, use actual measurements, and maintain receipts, and the deduction is straightforward to defend.

How do I calculate the home office deduction using the actual expense method? Measure your dedicated office space in square feet and divide by your home's total square footage to get your business use percentage. For example, a 150 sq ft office in a 1,800 sq ft home equals 8.3%. Multiply that percentage by your total annual housing costs — mortgage interest, property taxes, utilities, insurance, maintenance, and depreciation. Report the result on IRS Form 8829 (sole proprietors) or process through an accountable plan reimbursement (S-corps).

Your Next Step

Do you have a space at home where you regularly do practice-related work?

If yes... measure it. Add up your housing expenses. Do the math.

You might find a deduction you've been leaving on the table for years.

And if you want help setting up an accountable plan or calculating the right method for your situation, [that's exactly what we do](#).