Whether you are an employee or self-employed, you may be able to deduct certain expenses
of using a part of your home for business purposes.
To deduct business-use-of-the-home expenses, a part of your home must be used
regularly and exclusively:
- As the principal place of business for any trade or business in which you engage,
- As the place where you meet and deal with your patients, clients, or customers in
the normal course of your trade or business; or
- In connection with your trade or business, if you use a separate structure that is
not attached to your home.
If you use both your home and other locations regularly in the same trade or business,
you must determine which location is your principal place of business.
Beginning in 1999, your home office will also qualify as your principal place of
business for deducting expenses for its use if you meet the following requirements:
- You use it exclusively and regularly for the administrative or management
activities of your trade or business, and
- You have no other fixed location where you conduct substantial administrative or
management activities of your trade or business.
In general, because of the exclusive use rule, you cannot deduct business expenses for
any part of your home that you use for both personal and business purposes.
For example, if you are an attorney and use the den of your home to write legal briefs
and also for personal purposes, you may not deduct any business-use-of-your-home expenses.
The only exceptions to the exclusive-business-use rule are for qualified daycare providers
and for persons storing inventory or product samples used in their business.
If you are an employee, additional rules apply. Even if you meet the exclusive and regular
use tests you cannot take any deductions for the business use of your home unless this use of
your home is for the convenience of your employer
and your employer does not pay you rent for
the portion of your home that you use in providing services as an employee.
Some of the deductible business uses of the home expenses may include the business
portion of real estate taxes, deductible mortgage interest, rent, utilities, insurance,
depreciation, painting and repairs. You may not deduct expenses for lawn care or for
painting a room not used for business.
The amount you can deduct depends on the percentage of your home used for business.
To figure this percentage, divide the number of square feet used for business by the
total square feet in your home. Or, if the rooms are approximately the same size,
divide the number of rooms used for business by the total number of rooms in your home.
You figure the business portion of your expenses by applying this percentage to the total
of each expense. Qualified daycare providers must reduce their percentage to take into
account the time available for personal use of any area not used exclusively for business.
If your gross income from the business use of your home is less than your total business
expenses, your deduction for certain expenses for the business use of your home is limited.
However, those business expenses that are not deducted because of the limit can be carried
forward as part of next year's business-use-of-the-home expenses.
Publication 587,
Business Use of Your Home, has detailed information on the business use of your home rules,
including examples of administrative activities and situations satisfying the "no other fixed location"
requirement. If you are an employee, use the worksheet in Publication 587 to figure your deductions.
As an employee, you must itemize deductions on Schedule A, Form 1040, to claim expenses for
the business use of your home.
If you are self-employed, use Form 8829
to figure your business use of the home deductions and report those deductions on Schedule C, Form 1040.
If you are a direct seller, Publication 911,
Direct Sellers, Business Use of Your Home may be helpful. The interactive
Tax Trail has additional information on business use of your home.
Publications and forms may be downloaded from this site
or ordered by calling 1-800-829-3676.
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