There are two ways you can buy Microsoft Office. You can buy the traditional Microsoft Office 2016 product, or get it as part of an Office 365 software subscription. Here’s the difference.

Office 2016 vs. Office 365

Here’s the main difference: Office 2016 is the the traditional Microsoft Office product, sold for a one-time, up-front fee. You pay once to buy a version of Office 2016 you can install on a single PC or Mac and use for as long as you like. There’s no expiration date.

Office 365, on the other hand, is the new way Microsoft wants you to buy Office. Rather than paying a hefty up-front price, you pay a monthly or yearly fee and get access to the latest version of Office for as long as you pay the fee. You also get additional OneDrive cloud storage and access to the Office apps for tablets. You can choose a subscription that allows you to install Office on up to five different computers, sharing it with your family, or just get Office for yourself.

Office 2016: A Traditional Software Product

Office 2016 is a traditional software product. Microsoft sells “Office Home & Student 2016” for home users, and there are a few more expensive versions that include additional applications more frequently used by business users.

After paying the up-front fee, you get an Office 2016 license. You don’t even get a physical disc with Office 2016. Instead, you either buy a physical “key card” with a download code on it, or you buy a digital download that’s emailed to you.

This Office package only includes Word, Excel, PowerPoint, and OneNote. This package does not include Outlook, Publisher, and Access.

You can download and use Office 2016 for as long as you want. You own it. You’ll never have to pay anything else. However, when Microsoft releases a new version of Office, you’ll have to pay to buy the new version of Office, or be stuck with Office 2016 until you pay once again.

When buying Office 2016, you must choose between the “Office Home & Student 2016” product for Windows PCs and the “Office Home & Student 2016 for Mac” product for Macs (both of which cost $150). If you switch from a Mac to a Windows PC, or vice versa, you must buy Office again.

You can only install Office 2016 on a single PC or Mac at a time. You can deactivate it and move it to another PC, but you’ll need buy another license key if you want it installed on two computers at a time.

Office 365 Personal: An Office Subscription for One Person

Office 365 is Microsoft’s new method of selling and distributing Office. Office 365 Personal is the subscription plan designed for a single person who needs Office on a single computer. Office 365 gives you access to download and use the latest version of Office. Right now that’s Office 2016, but as soon as a new version comes out, you’ll be able to upgrade as part of your subscription without paying an additional fee.

You can either subscribe through your Microsoft account with a credit card or buy yearly Office 365 codes and add them to your account to redeem subscription time. Microsoft charges $70 per year or $7 per month for Office 365 Personal. Microsoft also offers a one-month free trial of Office 365 Personal, so you can try it before paying anything.

The Office 365 package includes Word, Excel, PowerPoint, and OneNote. However, it also includes Outlook, Publisher, and Access. In addition, you get 1 TB of online storage space in OneDrive and 60 minutes of Skype minutes every month. You can use these minutes to call phones from Skype.

You can only download and use Office through Office 365 if your subscription is current. If you stop paying for the subscription, you lose access to your Office applications.

When you subscribe to Office 365, you can install Office on either a PC or Mac. If you switch from a Mac to a Windows PC, or vice versa, you don’t have to pay anything extra. Just deactivate the license from your Windows PC and install it on your Mac.

Office 365 Personal allows you to install Office on one PC or Mac at a time, plus one tablet—either an iPad, Android, or Windows tablet.

Office 365 Home: An Office Subscription for Up to Five People

Office 365 Home is the subscription plan designed for families—or people who need Office on more than one computer at a time.

Office 365 Home includes everything Office 365 Personal includes, but for up to five computers instead of one computer. Microsoft charges $100 per year or $10 per month for Office 365 Home. So, it’s a better deal than Office 365 Personal if you have even two people who need Microsoft Office.

You can install Office applications on up to five PCs or Macs, plus five tablets (iPad, Android, or Windows). Up to five Microsoft accounts can get 1TB of cloud storage each, and up to five Skype accounts can get 60 minutes of monthly Skype minutes each.

Which Should You Buy?

In the long term, Microsoft wants to phase out the one-time-purchase versions of Office and transition entirely to subscriptions, just like how Adobe has axed the boxed copy of Photoshop and offers it only through a Creative Cloud subscription. Microsoft has adjusted the numbers to make an Office 365 subscription look like a better deal for most people.

For example, to get Office on a single PC or Mac for two years, you’d have to pay either $150 for Office 2016 or $140 for Office 365 Home. After those two years, you’d save money if you stuck with Office 2016—but, if Microsoft releases Office 2018 and you pay to upgrade, you’ll be worse off. In the meantime, you’d also get Outlook, Publisher, Access, 1TB of OneDrive storage, 60 Skype minutes a month, Office apps for tablets, and the ability to switch between Windows and Mac if you chose Office 365.

So, if you’re the kind of person that likes to upgrade every time a new version of Office comes out, get Office 365. If you know you’re going to be happy with Office 2016 for more than two years and these limitations don’t bother you, it may be a better deal to stick with Office 2016.

If you need more than one copy of Office, Office 365 Home seems like a much better deal. To get five copies of Office, you can either spend $750 up front for Office 2016 or pay $100 a year for Office 365 Home. Office 2016 will only be a better deal if you keep using Office 2016 for more than seven and a half years, which seems unlikely.

While you can use tablet versions of Office to view documents and do some basic editing without paying anything, an Office 365 subscription is the only way you can get the extra “premium features” in the Office apps for iPads, Android tablets, and Windows tablets. If you want full access to Office on tablets as well as a PC or Mac, you’ll need Office 365.

Office Online: A Free, Web-based Version of Office

RELATED: A Free Microsoft Office: Is Office Online Worth Using?

While we’re focusing on the desktop versions of Office for Windows PCs and Macs here, Microsoft also offers Office Online. This is a completely free, web-based version of Office. If you’re happy using Microsoft Office through a web browser, you can use web-based versions of Word, Excel, and PowerPoint for free.

These are simplified Office applications and don’t have all the features you’d get in the desktop applications—you can’t even use them offline, for example—but they’re surprisingly good. They also have excellent compatibility with Office document formats. They may be a good option if you don’t need Office often, or just need a few basic features.

Microsoft also offers desktop versions of its OneNote note-taking tool for free. You don’t need to pay for Office to get OneNote.

How to Save Money on Office 2016 or Office 365

While we’re quoting Microsoft’s official prices here—the prices you’ll pay at a Microsoft Store, for example—you can usually find better deals than this on both Office 2016 and Office 365.

For example, if you search Amazon for Microsoft Office, you’ll find Microsoft Office 2016 Home and Student for $115 (down from $150), one year of Office 365 Personal for $50 (down from $70), and one year of Office 365 Home for $90 (down from $100). The seller will mail you a physical key card which provides a code you can enter to either download Office or activate an Office 365 subscription. These prices will likely fluctuate over time, but we usually see cheaper prices on Amazon than on Microsoft’s store.

Profile Photo for Chris Hoffman Chris Hoffman
Chris Hoffman is Editor-in-Chief of How-To Geek. He's written about technology for over a decade and was a PCWorld columnist for two years. Chris has written for The New York Times and Reader's Digest, been interviewed as a technology expert on TV stations like Miami's NBC 6, and had his work covered by news outlets like the BBC. Since 2011, Chris has written over 2,000 articles that have been read more than one billion times---and that's just here at How-To Geek.
Read Full Bio »