What You Need to Know About the Home Office Tax Deduction

I frequently receive questions about the home office tax deduction. If you legitimately use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are some things to consider in helping you determine if you qualify for the home office deduction.....

1. Exclusive and Regular Use: Generally you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be...
...your principal place of business, or
...a place where you meet with patients, clients or customers in the normal course of your business, or
...a separate structure not attached to your home.

2. Storing Inventory or Product Samples: You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

3. Includes Cost Paid For Home: This deduction may include part of certain costs that you paid for having a home such as a part of the rent or allowable mortgage interest, real estate taxes and utilities. The amount you can deduct depends on the percentage of the home used for business.

4. Additional Requirements For Employees: If you are an employee, you must meet additional rules to claim a home office deduction such as your business use being for your employer’s convenience.

Contact me with any questions you have related to the home office deduction. It is important to accurately know the rules as this deduction is a red flag with the IRS due to its common inaccurate reporting.