Are you leaving deductions on the table?  Maybe, maybe not.  If you work from home, here’s  one to consider:  the home office deduction.

home based business

If you use a portion of your home for business, you may be able to take a home office deduction – even if you are an employee of someone else, self-employment is not required.   Here’s what you should know about the Home Office Deduction.

Main criteria for eligibility:  In general, in order to claim it, you must use part of your home exclusively and regularly:

    • as your main place of business, or
    • as a place to meet with/entertain clients or customers in the normal course of your business, or
    • in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

Caveats and/or exceptions (there are always exceptions, right?)  There are special rules for qualified daycare providers and for persons storing business inventory or product samples.  For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.  For example, home based daycare operators may use the majority their homes (living room, family room, rec room, basement, etc) regularly in the course of business but not exclusively as they also use these rooms in the course of their day-to-day lives with their families.

How much can you deduct?  The amount you can deduct depends on the percentage of your home used for business and the the ability to deduct certain expenses will be limited to gross income.

Now back to how you can deduct HO expenses even if you are an employee.  Again with the caveats.  For employees, additional criteria applies for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

Disclaimer:  The proceeding is not nor is it meant to be tax advice.  Please seek the advice of a tax professional to discuss the particulars of your situation.  If you would like more information straight from the tax code, check out  IRS Publication 587, Business Use of Your Home.

If you would like to have a consultation with the Common Cents Team of professionals – please send us an email.


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