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.
To deduct business–use–of–the–home expenses, part
of your home must be used regularly and exclusively as one of the following:
- Regularly and exclusively as the principal place of business for your
trade or business;
- Regularly and exclusively 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.
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.
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 regularly and exclusively for 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–use rule are for qualified day–care
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 regular
and exclusive use tests, you cannot take any deductions for the business use
of your home unless:
- the business use of your home is for the convenience of your employer;
and
- you do not rent any part of your home to your employer and use the rented
part to perform services as an employee.
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
for business.
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.
Qualified day–care providers must account for personal use of any area
not used exclusively for business when calculating the percentage of the home
used 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 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.
