IRS home office deductions – There can be a lot of advantages to working from home but doing your own taxes isn’t one of them! Unless of course you know exactly what you are doing but that can be quite tricky!
IRS home office deductions
Your home office is of course a business expense and you can absolutely claim it on your taxes but splitting things between office use and home use can sometimes be tricky and the calculations can seem confusing at times. Many people just don’t bother claiming but for the relative inconvenience the tax savings are well worth your time.
Below you can see the information from the IRS regarding deductions related to a home office space:
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. The home office deduction is available for homeowners and renters, and applies to all types of homes, from apartments to mobile homes. There are two basic requirements for your home to qualify as a deduction:
1. Regular and Exclusive Use.
You must regularly use part of your home exclusively for conducting business. For example, if you use an extra bedroom to run your online business, you can take a home office deduction for the extra bedroom.
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2. Principal Place of Your Business.
You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.
Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:
- Your business use must be for the convenience of your employer, and
- You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find:
- The requirements for qualifying to deduct expenses for the business use of your home (including special rules for storing inventory or product samples).
- Types of expenses you can deduct.
- How to figure the deduction (including depreciation of your home).
- Special rules for daycare providers.
- Selling a home that was used partly for business.
- Deducting expenses for furniture and equipment used in your business.
- Records you should keep.
- Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home (PDF), required if you are self-employed and claiming this deduction).
The rules in the publication apply to individuals.
Page Last Reviewed or Updated: 2013-01-04
Hopefully that is a help but if you are still having issues then it’s worth picking up the phone and calling the IRS. It is in their interest for you to file your taxes correctly so they will help you get it right and you can get all the tax claims that you are entitled too.
Please share any further thoughts or information you have related to this.
Thanks for reading.