The Rules for Claiming a Home Office on Taxes
A home office can provide a convenient way for self-employed individuals and employees with flexible jobs to work without having to commute to a work site. While a home office can be costly to set up and maintain, the Internal Revenue Service lets business owners and employees deduct the cost of using a home for business purposes.
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Qualifying for a Home Office Deduction
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The cost of using a home for business purposes is tax deductible if the office meets certain guidelines. According to the IRS, a home office is generally deductible if it's used regularly and exclusively as a principle place of business or as a place to meet clients or customers. Exclusive use means the office must only be used for business purposes. For example, a home office that contains a couch and TV that a family uses for recreation is not tax deductible.
Employees
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Employees who use a part of their home as an office may take the tax deduction for a home office in some cases. The IRS says that an employee must meet the same requirements as a business owner, and the use of the home office must be for the convenience of the employer. In addition, an employee cannot rent any portion of a home to an employer and then take a home office deduction on that portion of the home.
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Deductible Expenses
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Many expenses related to running a home office are tax deductible, including: painting, repairs, rent, insurance, security systems, utilities and services such as cleaning. Depreciation deductions can be taken over the course of several years to recover the cost of property purchased for business use, such as a computer system.
Amount of the Deduction
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Expenses that can be directly attributed to the home office -- such as the cost of repairing office property or painting the office -- are tax deductible. But the full deduction for a home office depends on the size of the office and the size of the home. The IRS says that for expenses that cannot be directly attributed to a home office -- such as the cost of rent and utilities -- a taxpayer must divide the total square footage of the home by the square footage of the office to calculate the percentage of indirect costs that are deductible. For example, if a home office is 300 square feet and a home is 1,500 square feet, 20 percent of indirect costs are tax deductible.
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