MIME-Version: 1.0 Content-Location: file:///C:/2675CA05/BusinessUseofYourHome.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" Business Use of Your Home

Business Use of Your Home

Whether you are self-empl= oyed or are an employee, you may be able to deduct certain expenses for the part of your home you use for business.

To dedu= ct business-use-of-the-home expenses, part of your home must be used regularly= and exclusively as one of the following:

  1. Regularly and exclusively as the princi= pal place of business for your trade or business;
  2. Regularly and exclusively as the place = where you meet and deal with your patients, clients, or customers in the nor= mal course of your trade or business; or
  3. In connection with your trade or busine= ss, if you use a separate structure that is not attached to your home. <= /o:p>

Under the principal-place-of-business test, you must determine that your home is the principal place of your trade or business after considering where your most important activities are performed and most of your time is spent, in order= to deduct expenses for the business use of your home.

Your ho= me office will also qualify as your principal place of business for deducting expenses for its use if you meet the following requirements:

  1. You use it exclusively and regularly for administrative or management activities of your trade or business; and=
  2. You have no other fixed location where = you conduct substantial administrative or management activities of your tr= ade or business.

In general, because of the exclusive-use rule, you cannot deduct business expenses for any part of your home that you use for both personal and business purposes. For example, if = you are an attorney and use the den of your home to write legal briefs and also= for personal purposes, you may not deduct any business-use-of-your-home expense= s. The only exceptions to the exclusive-use rule are for qualified day-care providers and for persons storing inventory or product samples used in their business.

If you = are an employee, additional rules apply. Even if you meet the exclusive and regular use tests, you cannot take any deductions for the business use of your home unless:

Deductible expenses for b= usiness use of your home include the business portion of real estate taxes, deducti= ble mortgage interest, rent, casualty losses, utilities, insurance, depreciatio= n, maintenance and repairs. You may not deduct expenses for lawn care in gener= al or for painting a room not used for business.

When figuring the amount = you can deduct for the business use of your home, you can use the entire amount of expenses attributable solely to the portion of the home used in your busine= ss. The amount you can deduct for expenses attributable to the whole house depe= nds on the percentage of your home used for business. To figure this percentage, you may divide the number of square feet used for business by the total squ= are feet in your home. Or, if the rooms are approximately the same size, divide= the number of rooms used for business by the total number of rooms in your home. You figure the business portion of your expenses by applying this percentag= e to the total of each expense. Qualified day-care providers must account for personal use of any area not used exclusively for business when calculating= the percentage of the home used for business.

If your gross income from= the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. However, those business expenses that can not be deducted because of the gr= oss income limitation can be carried forward to the next year but will be subje= ct to the deduction limit for that year.