IRS Topic 509 -
Business Use of Home
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 despite the
general denial of business expense
deductions for the home.
To deduct expenses for business use of
the home, part of your home must be used
regularly and exclusively as one of the
following:
The principal place of business for your
trade or business;
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.
Where the exclusive use requirement
applies, 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.
Further, 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.
Deductions also may be taken for regular
use of a residence for the provision of
day care services or for business
storage purposes; exclusive use is not
required in these cases. You also may
take deductions if you rent out your
residence. For more information, see
Publication 587
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. If you are a
qualified day-care provider who does not
use any area exclusively for day care,
your business portion is further limited
by the ratio of the number of hours the
area is used exclusively for business to
the total number of hours the portion
was available for any use.
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, other than mortgage interest,
taxes, casualty losses, and the like 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.
Get more information here
IRS Topic 509 - Business
Use of Home
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