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The home office deduction and the exclusive use test
The home office deduction provides significant deductions to business owners. The specific rules must be followed precisely or you lose the entire deduction. Exclusive use is one of the rules. I cover the deduction and the exclusive use rule.
If you use your home for work or business, you may be entitled to the home office deduction. The home office deduction is one of those wonderful tax deductions that allows a taxpayer to turn an otherwise non-deductible personal expense into deductible business expense.In this article, I'm going to review some of the rules and nuances of this deduction. You can find more information in IRS Publication 587 or the IRS YouTube video. The first thing to note are the specific rules you must follow to get this special deduction. If you fail to follow the rules, you will generally lose the deduction. To qualify to deduct expenses for business use of your home, you must use part of your home:
- Exclusively and regularly as your principal place of business,
- Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business,
- In the case of a separate structure which is not attached to your home, in connection with your trade or business,
- On a regular basis for certain storage use (Inventory storage or product samples)
- For rental use (See IRS Publication 527)
- As a daycare facility
- Your business use must be for the convenience of the employer, and
- You must not rent any part of your home to your employer and use the rented portion to perform service as an employee for the employer.
Learn more about the author, Brian Setzler, CPA.
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