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Income & Expenses

Question: I use my home for business. Can I deduct the expenses?

Answer:

To deduct expenses related to the part of your home used for business, you must meet specific requirements. Even then, your deduction may be limited.

You must use part of your home:

  • Exclusively and regularly as your principal place of business,
  • Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business,
  • In the case of a separate structure which is not attached to your home, exclusively and regularly in connection with your trade or business,
  • On a regular basis for storage of inventory or product samples for use in your trade or business of selling products if your home is the only fixed location of the trade or business,
  • For rental use, or
  • As a daycare facility.


Note: You do not have to meet the exclusive use test if you satisfy the rules that apply to storage, rental, or daycare use.

Beginning in 2013, a safe harbor method (Revenue Procedure 2013-13) is available to qualifying taxpayers. A prescribed rate of $5 per square foot (up to a maximum of 300 square feet) can be claimed directly on Schedule C (Form 1040) (PDF), Profit or Loss From Business (Sole Proprietorship), by entering the square footage of the home and square footage of the office in the applicable boxes to indicate their election to use the safe harbor option.

Note:  You may not use the safe harbor method for rental use of your home.

If the safe harbor option is not chosen, taxpayers will continue to use Form 8829 (PDF), Expenses for Business Use of Your Home, to compute the expense allowable as a deduction on Schedule C (Form 1040).  For more information, see Home Office Deduction and Simplified Option for Home Office Deduction on IRS.gov.

If you are an employee and use a part of your home for business, you may qualify for a deduction.  You must meet the use tests discussed above plus:

  • Your business use must be for the convenience of your employer, and
  • You do not rent any part of your home to your employer and use the rented portion to perform services as an employee.

Employees claim the deduction for business-use-of-home expenses as an itemized deduction on Schedule A (Form 1040) (PDF), Itemized Deductions.  There is a worksheet in Publication 587, Business Use of Your Home, to calculate the amount of the deduction.

Note:  Whether the business use of your home is for your employer’s convenience depends on all the facts and circumstances.  Business use is not considered to be for your employer’s convenience merely because it is appropriate and helpful.


Category: Small Business, Self Employed, Other Business
Subcategory: Income & Expenses

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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