Business Use of Your Home
To deduct expenses related to the business use of part of your home, 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 both the following tests. Your use of the business part of your home must be: exclusive, regular, for your trade or business, AND The business part of your home must be one of the following: your principal place of business, a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or a separate structure (not attached to your home) you use in connection with your trade or 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.
Exceptions to exclusive use. You do not have to meet the exclusive use test if either of the following applies. You use part of your home for the storage of inventory or product samples. You use part of your home as a daycare facility.
Principal place of business. 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 trade or business. You have no other fixed location where you conduct substantial administrative or management activities of your trade or 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, the time spent at each location.
The most important deductions from claiming the office in home expense is not the office in home deduction. Without an office in the home the vehicle expense from home to the first business stop is commuting and, therefore, not deductible. Likewise from the last business stop to home is not deductible. By having an office in the home all business vehicle expense is deductible.
This column is offered as a public service with the understanding that each person's tax situation is different; and that you should consult your CPA before taking any action based upon comments made in this article. Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates”. I can be reached at 825-2771.