If you use part of your home for business, you might be able to deduct home business expenses. You must meet some requirements per IRS publication 334. You can deduct a percentage of many of the costs of running your home, such as utilities, rent, insurance, depreciation, mortgage interest, real estate taxes and that percentage depends on the size of your home office compared to your total size of your home.
The home-office tax deduction is available to both homeowners and renters. It is available for the space used in your home for business purposes—such as a studio, workshop, or garage. And according to the IRS, your “home” can be a house, condo, or apartment unit; as well as a mobile home or boat—as long as you can cook and sleep there.
However, you must meet two requirements to qualify for the home office deduction:
Requirement #1: Regular and exclusive use. You must regularly use part of your home exclusively for a trade or business.
Requirement #2: Principal place of business. You must also be able to show that you use your home as your principal place of business. Alternatively, you must be able to show at least one of the following:
- You meet patients, clients, or customers at home.
- You use a separate structure on your property exclusively for business purposes.
Ordinary and necessary business expenses are deductible even if you do not qualify for a home office deduction. These include long-distance phone calls, a separate business telephone line, and the cost of office supplies and equipment. The above IRS rules apply only to the expenses of actually running and maintaining your home, such as utilities, rent, depreciation, home insurance, mortgage interest, real estate taxes and repairs.
Regular and Exclusive Use
You can deduct home-related expenses only if you regularly use part of your home for business purposes.
The Internal Revenue Service does not define “regular use.” You will probably meet this requirement if you work from home few days per week or for few hours each day.
Exclusive use means that you use a portion of your home only for business. If you use a room of your home for your business and also for personal purposes, you don’t meet the exclusive use test. However, you may be able to claim the home office deduction if you can set aside part of a larger room to be used only for business.