The pitch for working from home is that it’s cheaper. No commute, no office lease, no overpriced lunches near the business district. And on the biggest line items, that’s true — nobody misses paying for a desk they only used to eat sandwiches at.
But “cheaper than an office” is not the same as “free,” and a lot of remote solo businesses quietly run on a cost base they’ve never actually added up. The expenses didn’t disappear when you started working from your spare room. They just got smaller, more frequent, and easier to ignore — which is exactly what makes them dangerous to your margins.
If you set your rate as though working from home costs nothing, you’ve given yourself a pay cut you can’t see. Here’s what it actually costs, and how to price it in on purpose.
The real cost of working from home for a solo business is a set of small, recurring expenses: internet, power and heating, software subscriptions, hardware that wears out, and self-funded benefits like holidays, sick days and retirement. Working from home is still usually cheaper than an office, but not free. Add these costs up, divide them across your billable hours, and build them into your rate.
The costs that moved into your home
When the office went away, some of its costs came home with you and put on a disguise.
The infrastructure you now pay for. An office bundled a lot of things into one invisible overhead: reliable internet, electricity, heating and cooling, a chair that doesn’t wreck your back, a backup plan when the power goes out. At home, each of those is now your bill. The fast connection you need for video calls, the extra electricity from being home all day, the second monitor — these are real business costs that used to belong to an employer.
The tools and subscriptions. Remote solo work runs on software: the design suite, the accounting tool, cloud storage, a password manager, the video-call plan you upgraded when meetings got longer. Individually they’re small — $9 here, $15 there — which is exactly why they slip past you. Added up over a year, a stack of “small” subscriptions is often one of the largest fixed costs a home-based business carries, and the easiest to forget when you set a rate.
Hardware that wears out on your dime. The laptop is a business asset now, and it has a lifespan. So does the desk chair, the headset, the phone. An employer replaced these on a cycle you never thought about. Now the replacement fund is you — and if you’re not setting a little aside, a dead laptop becomes a surprise expense instead of a planned one. A financial buffer for your solo business is what turns that surprise into a non-event.
The self-provided benefits. This is the big one people forget. Working for yourself from home means no paid holiday, no sick pay, no employer topping up your retirement or covering your health insurance. Every day you don’t work is a day you don’t earn, and every one of those benefits is now a cost you cover out of your own rate. It doesn’t show up as an invoice, which is precisely why it’s the most commonly ignored cost of all.
Why “no commute” hides all of this
The reason these costs sneak by isn’t that they’re huge. It’s that they’re small and constant, and they lack the one thing that makes an expense feel real: a single, obvious moment of paying it. A commute was visible — you felt the train fare and the fuel. A $12 subscription auto-renewing at 2am while you sleep is not.
Death by a thousand small charges is still death by expense. The mental relief of skipping the commute tricks a lot of people into thinking their whole cost base got lighter, when really it just got quieter. Quiet costs are still costs. They just don’t argue with you, so you forget to price for them.
How to build home-office costs into your rate
The fix isn’t to cut every subscription or feel guilty about your electricity bill. It’s to see the number, so it lives in your rate instead of eroding your margin. That number is your overhead: the cost of running the business that isn’t tied to any one client job.
- Add up your actual monthly overhead. Every subscription, a slice of your internet and power bill, a monthly set-aside for hardware replacement. One honest total. Most people are surprised — usually because it’s higher than they guessed, occasionally because they’re paying for two tools that do the same job.
- Divide it across your billable hours. If your overhead is a certain amount a month and you bill a certain number of hours, you now know what each hour has to cover before it pays you a penny. As an illustration, $400 of monthly overhead spread over 100 billable hours is $4 an hour. That’s your floor. A rate below it means you’re subsidising your clients out of your own pocket. The freelance rate calculator does this sum for you.
- Add a line for the benefits you’re self-funding. Time off, quiet periods, retirement, insurance. If you don’t build these into your rate, no one else will, and “I forgot to charge for holidays” is not a fun thing to realise in December. Here’s how to price in your time off.
- Review the subscription stack twice a year. Remote businesses accumulate tools like a coat accumulates lint. A short audit almost always finds something you’re paying for and no longer use.
None of this makes working from home expensive. It stays the cheaper option — that part of the pitch was real. But cheaper isn’t free, and the difference between the two is a set of quiet, recurring costs that either sit in your rate on purpose or come out of your take-home pay by accident. The whole game is to see them clearly, add them up once, and let your pricing carry them — so that skipping the commute actually leaves you better off, instead of just feeling like it does. If you’re starting from scratch, how to set freelance rates walks through the rest of the calculation.
Frequently asked questions
Can I deduct home office costs as a freelancer?
In many countries you can deduct a share of home running costs — such as rent, utilities and internet — that relates to the space and time you use for work. How that share is calculated, and whether a simplified flat-rate method is available, varies by country, so confirm the rules locally. Our guide to tax deductions freelancers forget to claim covers the wider list.
How much does it cost to work from home each month?
It varies too much between people and places for a single figure to be useful; the only reliable number is your own. Add up your subscriptions, a fair share of your internet, power and heating, and a monthly set-aside for replacing equipment. Most solo business owners find that once they total it, the figure is higher than they’d assumed.
Is it cheaper to work from home or rent a coworking space?
Working from home is usually cheaper in cash terms, because a coworking desk adds a membership fee on top of costs you still pay at home. A coworking space can still be worth it if it makes you noticeably more productive or helps you win work. Compare the membership against your billable rate and the hours it would realistically add.
Should I charge clients more because I work from home?
No — you should charge enough to cover the real costs of running your business, wherever you work from. Working from home doesn’t justify a premium, but it doesn’t make your costs disappear either. Clients pay for the outcome; your job is making sure the rate behind it covers your overhead, your time off and your profit.