Be Sure Your Home Office Space is Deductible
Even if you have a legitimate business set up, you still need to be sure that the area in your home where you conduct business can pass the IRS deduction test. The IRS rule for qualifying deductions for use of your home is states that you can only deduct the portion of your home that is used "exclusively and regularly" for your business. You can't put office equipment, a calendar and a phone in a room and deduct it as your "office."
In addition, the business part of your home must meet these qualifications:
- It must be your "principal place of business," or
- It must be the place where you meet patients/clients/customers in the "normal course of business," or
- It must be a separate unattached structure used in connection with your business, such as a garage or studio. The structure must be "exclusively and regularly" used for your business.
If the area where you "exclusively and regularly" work in your home is used for administrative and managerial functions, you can deduct this area. But you cannot do any personal business here. For example, if you have an area in your home where you pay business bills, do your online business bookkeeping, and order business supplies, but you also do personal bookkeeping and computer work in this same area, you cannot include this area in your deductible expenses, because it is not exclusively used for business. Even a small amount of time for personal use can negate your business deduction of this area.
For example, if you do work outside your home (such as construction, maintenance, plumbing or electrical work) and you do your business books in an area of your home, you can deduct this area for business use... as long as you conduct no personal business in this area.
Next, other home business tax deductions to avoid....
