Home office deduction

[dave-handler]

I'm on the fence about this deduction.  I have my desk, PC, phone and record keeping set up in our second bedroom that isn't being used as a bedroom.  It's just the wife and I.  I primarily use this space for both Uber related work and home finance (paying the bills).  Obviously I use my space to browse the internet.  Can I take this deduction?

[MichaelDC · Accepted solution]

There are only two rules to claiming the home office deduction.

1. It needs to be used regularly and exclusively for your business and
   
2. It needs to be your principal place of business.
   

(In addition, if you're working at home for an employer, your home office must be for the convenience of your employer – not just you. This means if your employer lets you telecommute as an option, you can't take the deduction. However, if your employer doesn't have their own office or workplace, forcing you to work from home, you may be able to claim the deduction.)

Look closely at the regularly and exclusively rule:

Let's say you turned an unused bedroom into your office and installed a computer with its own high-speed connection. You go in there 4-6 days every week, building websites. The room is used strictly for business – contacting prospects and clients, meeting with them, and working on their websites. In this case, your office would meet the regular and exclusive use requirement.

On the other hand, if you or a family member occasionally go into your office so they can watch movies or play games on your computer, your office is no longer being exclusively used for business.

Principal place of business. This doesn't necessarily mean that the majority of your business activities need to take place in your home office.

What it means is that you use your home office regularly and exclusively to administer or manage your business, and that substantial administration or management activities for your business are not conducted at any other fixed location.

Here's an example: Larry just started a new consulting business, and has set aside a spare bedroom as his office which he only uses for business purposes. Currently about 85% of his time is spent outside the home, meeting potential clients in various restaurants and coffee shops. However, he does all his scheduling, planning, bookkeeping, etc. from his home office. These administrative and managerial activities qualify his home office as his principal place of business, even though he's spending the majority of his time outside of his home office.

If you have a regular job in addition to self-employment: The "principal place of business" question refers to your self-employment activities, not your regular job.