John B. Barry, CPA, P.A.

Home Office Rules – Maximizing Your Deductions

Home Office Rules

To determine if your home office qualifies for the deduction, review these tests and requirements:

1. Does your home office meet the Exclusive Use Test?

2. Does your home office meet the Regular Use Test?

3. Is your home office your Principal Place of Business?

4. How much of your Income is related to work done in your home office?

5. Was your home office active for (part of the year), or for the (entire year)?

6. Your business use must be for the convenience of your employer.

Exclusive Use: You must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition. You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes.

Regular Use: You must use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use. You must consider all facts and circumstances in determining whether your use is on a regular basis.

Principal Place of Business: You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. To determine whether your home is your principal place of business, you must consider:
1. The relative importance of the activities performed at each place where you conduct business,
2. The amount of time spent at each place where you conduct business.
Your home office will qualify as your principal place of business if you meet the following requirements:
3. You use it exclusively and regularly for administrative or management activities of your trade or business.
4. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

Income: If some of your income is from a place of business other than your home, you must first determine the part of your gross income from the business use of your home.

Time: If you did not operate a business for the entire year, you can deduct only the expenses paid or incurred for the portion of the year you used your home for business.

Employee: For your home office to qualify, it must be for the convenience of your employer.
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John B. Barry, CPA, P.A.