Can I Deduct My Home Office?

If you've ever worked from home, you've probably asked your CPA this question.   Most clients think that they can take a deduction if they have ever worked from home.  The truth is, the IRS has very specific guidelines to determine who may qualify for a home office deduction.

The two basic requirements are:

1. Regular and Exclusive Use – Part of your home must be used solely for business on a regular basis.  If you use the space for both personal and business purpose then you cannot claim that space as your office.  For example, if you work from your kitchen table, that space will probably not qualify for exclusive use for business!

2. Principal Place of Business – Your home office will meet the principal place of business requirement if you regularly use it exclusively for administration or management of your business and you use no other fixed location for similar purposes.  Administrative activities can include billing, keeping books and records, ordering supplies, setting up appointments, placing orders.

You can also deduct expenses for a separate structure used for your business, such as a garage, barn, greenhouse or workshop if you use it regularly and exclusively for business.

If you are an employee, you can only deduct a home office after meeting the above requirements, if the arrangement is for the convenience of your employer.

Finally, you can only deduct the home office expense to the extent that your gross income from the business exceeds your total business expenses.   If your home office expenses are limited, you can carry forward the expenses that cannot be deducted on Schedule A.