Business Use
of Your Home
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.
To qualify to claim expenses for business use of your home, you must meet the following
tests.
- Your use of the business part of your home must be:
- Exclusive (however, see Exceptions to exclusive use, later),
- Regular,
- For your business, AND
- The business part of your home must be one of the following:
- Your principal place of business (defined later),
- A place where you meet or deal with patients, clients, or customers in the normal course
of your business, or
- A separate structure (not attached to your home) you use in connection with your
business.
Exclusive use. To qualify under the exclusive use test, you must use
a specific area of your home only for your trade or business. The area
used for business can be a room or other separately identifiable space. The space does not
need to be marked off by a permanent partition.
You do not meet the requirements of the exclusive use test if you use
the area in question both for business and for personal purposes.
Example. You are an attorney and use a den in your home to write
legal briefs and prepare clients' tax returns. Your family also uses the den for
recreation. The den is not used exclusively in your profession, so you cannot claim
a business deduction for its use.
Exceptions to exclusive use. You do not have to meet the
exclusive use test if you use part of your home in either of the following ways.
- For the storage of inventory or product samples.
- As a day-care facility.
For an explanation of these exceptions, see Publication 587, Business Use of Your
Home (Including Use by Day-Care Providers).
Regular use. To qualify under the regular use test, you must use a
specific area of your home for business on a continuing basis. You do not meet the test if
your business use of the area is only occasional or incidental, even if you do not use
that area for any other purpose.
Principal place of business. You
can have more than one business location, including your home, for a single trade or
business. To qualify to deduct the expenses for the business use of your home under
the principal place of business test, your home must be your principal place of business
for that business. To determine your principal place of business, you must consider all
the facts and circumstances.
Your home office will qualify as your principal place of business for deducting
expenses for its use if you meet the following requirements.
- You use it exclusively and regularly for administrative or management activities of your
business.
- You have no other fixed location where you conduct substantial administrative or
management activities of your business.
Alternatively, if you use your home exclusively and regularly for your business, but
your home office does not qualify as your principal place of business based on the
previous rules, you determine your principal place of business based on the following
factors.
- The relative importance of the activities performed at each location.
- If the relative importance factor does not determine your principal place of business,
you can also consider the time spent at each location.
If, after considering your business locations, your home cannot be identified as your
principal place of business, you cannot deduct home office expenses. However, for other
ways to qualify to deduct home office expenses, see Publication 587.
Deduction limit. If your gross income from the business use of your
home equals or exceeds your total business expenses (including depreciation), you can
deduct all your business expenses related to the use of your home. If your gross income
from the business use is less than your total business expenses, your deduction for
certain expenses for the business use of your home is limited.
Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and
depreciation (with depreciation taken last), allocable to the business, is limited to the
gross income from the business use of your home minus the sum of the following.
- The business part of expenses you could deduct even if you did not use your home for
business (such as mortgage interest, real estate taxes, and casualty and theft losses that
are allowable as itemized deductions on Schedule A (Form 1040)).
- The business expenses that relate to the business activity in the home (for example,
business phone, supplies, and depreciation on equipment), but not to the use of the home
itself.
Do not include in (2) above your deduction for one-half of your self-employment tax.
Use Form 8829, Expenses for Business Use of Your Home, to figure your
deduction.
More information. For more information on
deducting expenses for the business use of your home, see Publication 587.
Other Expenses
You Can Deduct
You may also be able to deduct the following expenses. See
Publication 535 to find out whether you can deduct them.
- Advertising.
- Clean-fuel vehicles and refueling property.
- Donations to business organizations.
- Education expenses.
- Environmental cleanup costs.
- Impairment-related expenses.
- Interview expense allowances.
- Licenses and regulatory fees.
- Moving machinery.
- Outplacement services.
- Penalties and fines you pay for late performance or nonperformance of a contract.
- Repairs that keep your property in a normal efficient operating condition.
- Repayments of income.
- Subscriptions to trade or professional publications.
- Supplies and materials.
- Utilities.
Expenses You Cannot Deduct
You usually cannot deduct the following as business expenses.
For more information, see Publication 535.
- Bribes and kickbacks.
- Demolition expenses or losses.
- Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs.
- Lobbying expenses.
- Penalties and fines you pay to a governmental agency or instrumentality because you
broke the law.
- Political contributions.
- Repairs that add to the value of your property or significantly increase its life.
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