As an individual taxpayer, you may qualify to take a home office deduction if you meet one or more of these tests:
- The space is used exclusively and regularly as your principal place of business,
- The space is used 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, it is used in connection with your trade or business,
- On a regular basis, the area is used for storage of samples or inventory, or
- Part of your home is used as a daycare facility.
The area your office occupies does not have to be a separate room, nor does it need to be partitioned off in any way, but it must meet the “exclusive and regular use” test. If you write proposals or do office bookkeeping on the dining room table, but your family also eats meals there, this use would not qualify. If you keep records of your stock trades or royalty payments in your den, you are dealing with personal finances and not a trade or business; this use doesn’t allow for a home office deduction.
The home office deduction offers a small businessperson some advantageous tax write-offs, such as the proportional costs of utilities, mortgage payments, maintenance and upkeep expenses, and other costs associated with both your home and your business, but it can be difficult to navigate the rules successfully and avoid an IRS audit. Roberts Tax Advisory can show you the best way to take this deduction; contact us today for more information.