|Tax Topic #509
||2008 Tax Year
Topic 509 - Business Use of Home
Whether you are self–employed or are an employee, you may be able
to deduct certain expenses for the part of your home you use for business
despite the general denial of business expense deductions for the home.
To deduct expenses for business use of the home, part of your home must
be used regularly and exclusively as one of the following:
- The principal place of business for your trade or business;
- 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.
Where the exclusive use requirement applies, 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. Further, under
the principal-place-of-business test, you must determine that your home is
the principal place of your trade or business after considering where your
most important activities are performed and most of your time is spent, in
order to deduct expenses for the business use of your home.
Deductions also may be taken for regular use of a residence for the provision
of day care services or for business storage purposes; exclusive use is not
required in these cases. You also may take deductions if you rent out your
residence. For more information, see Publication 587
Deductible expenses for business use of your home include the business
portion of real estate taxes, deductible mortgage interest, rent, casualty
losses, utilities, insurance, depreciation, maintenance and repairs. You may
not deduct expenses for lawn care in general or for painting a room not used
When figuring the amount you can deduct for the business use of your home,
you can use the entire amount of expenses attributable solely to the portion
of the home used in your business. The amount you can deduct for expenses
attributable to the whole house depends on the percentage of your home used
for business. To figure this percentage, you may 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.
If you are a qualified day-care provider who does not use any area exclusively
for day care, your business portion is further limited by the ratio of the
number of hours the area is used exclusively for business to the total number
of hours the portion was available for any use.
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, other than mortgage interest, taxes, casualty losses, and
the like is limited. However, those business expenses that can not be deducted
because of the gross income limitation can be carried forward to the next
year but will be subject to the deduction limit for that year.
If you are in the business of farming or are an employee, use the worksheet
in Publication 587 , Business Use of Your Home, (including use
by daycare providers) to figure your deduction. As an employee, you must itemize
deductions on Form 1040, Schedule A (PDF) to
claim expenses for the business use of your home. Farmers claim their expenses
on Form 1040, Schedule F (PDF). If you are self–employed,
use Form 8829 (PDF) to figure your business–use–of
–the–home deductions and report those deductions on Form 1040, Schedule C (PDF).
Publication 587 has detailed information on rules for the business
use of your home, including how to determine if your home office qualifies
as your principal place of business.
Page Last Reviewed or Updated: December 22, 2008
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