Can resellers use the simplified home office deduction for inventory storage?
Yes, if the tests are met: the simplified method is $5 times the square footage used regularly and exclusively for business or regularly to store inventory or product samples, capped at 300 square feet, so the most it can be is $1,500. Storage space doesn't have to pass the exclusive-use test, but only if you sell products at wholesale or retail, your home is the only fixed location of your business, and it's a separately identifiable space suitable for storage that you use regularly.
General information from IRS sources, not tax advice. It doesn't say what you should file; check with a tax professional about your own situation.
Checked against the IRS pages listed below on .
What the IRS says
"In most cases, you'll figure your deduction by multiplying the area (measured in square feet) used regularly and exclusively for business, regularly for daycare, or regularly for storage of inventory or product samples, by $5."
"If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test."
"Your home is the only fixed location of your trade or business."
"Incidental or occasional business use is not regular use."
The tests for each kind of space
| Space | What Publication 587 requires | Reseller example |
|---|---|---|
| Office | Used exclusively and regularly as your principal place of business. Administrative or management work counts if you have no other fixed location where you do substantial administrative or management work | A spare room used only for listing, bookkeeping and ordering supplies |
| Inventory storage | You sell products at wholesale or retail; you keep the inventory at home for use in the business; home is the only fixed location of the business; you use the space regularly; it is a separately identifiable space suitable for storage | Shelving along one garage wall that holds stock year-round |
| Any qualifying space | Regular use: incidental or occasional business use is not regular use | A table used for photos twice a year wouldn't be regular |
Simplified method or regular method
- Simplified: $5 per square foot, up to 300 square feet, with no depreciation deduction and no later recapture of depreciation for the years it's used. Mortgage interest and real estate taxes are claimed in full on Schedule A if you itemize.
- Regular: actual expenses for the business percentage of the home, figured on Form 8829, including depreciation, which is recaptured when the home is sold.
- Both: the deduction can't exceed the gross income from the business use of the home minus business expenses not related to the home. Only the regular method carries an excess over to the next year.
- You choose each year by using a method on a timely filed original return; once chosen for a year it can't be changed for that year. Switching back to the regular method later means using the optional depreciation tables.
Part-year use and changes in size
Publication 587 says that if the qualified use covered only part of the year or its size changed, the simplified deduction uses the average monthly allowable square footage: add the allowable square feet for each month, at most 300 a month, and divide by 12. A month with fewer than 15 days of qualified use counts as zero.
Worked examples
An office and a storage wall
A 120-square-foot office used only for the business and 150 square feet of garage shelving used regularly for inventory add up to 270 square feet. At $5 a square foot, the simplified deduction is $1,350, if the gross income limit allows it.
More space than the cap
A 180-square-foot office and 240 square feet of storage are 420 square feet, but the simplified method stops at 300, so the deduction is at most $1,500.
Starting in July
Publication 587's own example: business use of 420 square feet starts July 20. July has fewer than 15 days of use, so it counts as zero; August through December count 300 each. The average is 125 square feet (1,500 divided by 12), so the simplified deduction is $625.
The gross income limit
Gross income from the business use of the home is $9,800 and business expenses not related to the home are $8,900. The home office deduction is limited to $900, so a $1,350 simplified figure is cut to $900, and the simplified method carries nothing over.
Edge cases
- The storage exception needs your home to be the only fixed location of your business, so a seller who also works out of a rented warehouse or shop should look at that test closely.
- Publication 587's example of a retail seller who regularly uses half the basement for inventory and samples, and sometimes uses it personally, still allows the storage space.
- Employees can't claim a home office deduction for their jobs: the IRS says miscellaneous itemized deductions for employee business expenses were eliminated for tax years beginning after 2017.
- If you moved during the year, the simplified method can be used for only one of the homes; the other uses actual expenses.
What to do
- Measure each space and note the date you started using it.
- Keep the storage area separately identifiable, such as dedicated shelving, and photograph it.
- Compare the simplified figure with actual expenses on Form 8829 with a tax professional.
- If your home office is your principal place of business, see how that changes which trips count as business miles.
Questions
Does a closet full of inventory count?
It can, under the storage exception, if it's a separately identifiable space suitable for storage, you use it regularly, you sell at wholesale or retail and your home is the only fixed location of your business.
What's the most the simplified method can give?
$1,500: 300 square feet at $5, and no more than the gross income limit allows.
Can I switch methods next year?
Yes. You choose each year, and the IRS says the change isn't a change in accounting method. Going back to the regular method means using the optional depreciation tables.
General information, not tax advice
This page summarizes IRS publications, instructions and guidance as read on . It doesn't say what you should file or deduct. Tax rules depend on your facts, and state rules aren't covered here (see state rules). Check with a tax professional.
Sources
Every figure, rule and quote on this page comes from one of these official pages.
- Instructions for Schedule C (Form 1040) (2025) (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
- Publication 587 (2025), Business Use of Your Home (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
- Simplified option for home office deduction (IRS, page reviewed or updated Mar 2, 2026; read Oct 19, 2026)
- Publication 334 (2025), Tax Guide for Small Business (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
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