Income Tax Service

Terry Hough

March 22, 2013 Newsletter

Home Office Deduction: a Tax Break for Those Who Work from Home

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home.

Here are six facts to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, 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. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.
2. You do not have to meet the exclusive use test if you use part of your home
   • to store inventory or product samples, or
   • as a daycare facility.
3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.
4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.
5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct and then report your deduction on the proper line of Schedule C, Profit or Loss From Business.
6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience. You should report any computed deduction on Form 2106 which will flow to the Miscellaneous Deduction section of Form 1040, Schedule A, Itemized Deductions.

Additional IRS Resources:

• Form 8829, Expenses for Business Use of Your Home
• Schedule C, Profit or Loss From Business
• Publication 587, Business Use of Your Home

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