Whether you are self-employed or an employee, if you use a portion of your home for business purposes, you may be able to take a home office deduction.
You can deduct certain expenses if your home is the principal place where your trade or business is conducted. You can also take a deduction for business use of the home if that is where you meet and deal with clients or patients in the course of your business. If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
Your home office will qualify as your principal place of business if you use it exclusively and regularly for the administrative or management activities associated with your trade or business. There must also be no other place where you can conduct these administrative or management activities. If you use both your home and other locations regularly in your business, you must determine which location is your principal place of business.
If you are an employee, you have additional requirements to meet. You cannot take the home office deduction unless the business use of your home is for the convenience of your employer. Also, you cannot take deductions for space you are renting to your employer.
Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.
Expenses that you can deduct for business use of the home 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.
There are other rules for qualified daycare providers and for persons storing business inventory or product samples.
If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040. Employees can use the worksheet in Publication 587, "Business Use of Your Home," to figure their allowable expenses and claim them as a miscellaneous itemized deduction on Schedule A, Form 1040.
For more information, see Publication 587, "Business Use of Your Home. The publication is also available by calling the IRS at 1-800-TAX-FORM (1-800-829-3676).