If you use a part of your home for your business or for your employer’s business, you can claim a deduction for the business use of your home. This deduction is referred to as the home office deduction.
There are some tests that you must meet to be eligible for this deduction; these are as follows:
- To claim this deduction, the part of your home used for business must be used regularly and exclusively for that purpose.
- This part of your home should be the place where you meet or deal with customers, patients, or clients in the normal course of your business.
- If that part of your home used for business is also used for personal purposes, you cannot claim the business use of home deduction.
- If you are an employee, to claim the deduction, the use of your home must be for your employer’s convenience.
- If you collect rental payments from your employer for the part of the home that you use for your employer’s business, you cannot claim the business use of home deduction.
The home office deduction allows you to deduct expenses directly related to maintaining your home office. You can also deduct a portion of certain expenses that are associated with your home as a whole. These expenses include insurance, utilities, repairs, security system expenses, maid service, garbage disposal, and decorating expenses. Generally, the amount of your deduction for whole-house related expenses is limited to the square footage of the area you’re using for business purposes. You may not deduct expenses for lawn care in general, or for painting a room not used for business.
Some people are of the perception that claiming this deduction makes you a target for a IRS audit, so if you decide to claim this deduction, it would be prudent to make sure that you meet the requirements to the letter. The best way to do this is to only claim the home office deduction if you qualify and to only claim the expenses that you are entitled to. It is also very important that you keep proper records of your expenses, should the IRS question your eligibility, or a number of expenses you are claiming.
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