Your home office must be either the principal location of your business or a place for regular customer or client meetings.
Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:
- There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
- The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
The law is clear, and the IRS is serious about the exclusive-use requirement. Say you set aside a room in your home for a full-time business, and you work in it ten hours a day, seven days a week. If you let your children use the office to do their homework, you violate the exclusive-use requirement and forfeit the chance for home office deductions.
Storage of inventory or product samples.
If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test.
However, you must meet all the following tests.
You sell products at wholesale or retail as your trade or business.
You keep the inventory or product samples in your home for use in your trade or business.
Your home is the only fixed location of your trade or business.
You use the storage space on a regular basis.
The space you use is a separately identifiable space suitable for storage.
The most exact way to calculate the business percentage of your house is to measure the square footage devoted to your home office as a percentage of the total area of your home.
Click here for How small business owners can deduct their home office from their taxes
Click here for The Home Office Deduction
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