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Home Office Deduction

Posted by attorney Henry Lively

Many taxpayers do not want to take the home office deduction for fear that it will trigger an audit. However, when you use part of your home for business the tax code allows you to take a deduction for the expenses for the "business use of your home." If you meet the requirements of the deduction you should take what you are entitled to under the code. The amounts that you can deduct include utilities, rent, insurance, depreciation, mortgage interest, real estate taxes, repairs, improvements, and some casualty losses.

This deduction is available to both renters and homeowners. As long as you can cook and sleep at the facility the IRS considers the property a home. You must meet two requirements to actually take a home office deduction.

  1. Regular and Exclusive Use - To qualify for the home office deduction you must use a part of your home regualarly and exclusively for a trade or business.
  2. Principal Place of Business - You must also be able to show that your home is used as your principal place of business, or that you meet patients, clients, or customers at your home or you use a separate structure at your home for business purposes for your trade or business.

If you do not meet the above requirements for a home office deduction you may still be able to deduct some or all of your expenses for running your business out of your home as ordinary and necessary business expenses.

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