Home Office Deduction
Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence are not deductible with the exception of mortgage interest up to certain limitations, and property taxes. However, if you use part of your home for business purposes you may be able to take a home office deduction.
Expenses that can be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation.
In order to claim a business deduction, you must use part of your home:
Exclusively and regularly as your principal place of business, which may include a place to meet or deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home; or
On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.
In addition, if you work as an employee you can claim this deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home is not rented by the employer.
Exclusive use means a specific area of the home is used only for trade or business. Regular use means the area is used regularly for trade or business. Incidental or occasional business use does not qualify for the home office deduction. Should at anytime the same space be used for any use other than for business, that activity disqualifies the entire deduction for home office expenses.
Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies.
The prorate share of the expenses to maintain a home or apartment based upon a reasonable measure related to the entire cost of maintaining the home is applicable in computing the deduction. Typically the measure applied in the calculation is based upon square footage of the area dedicated to the exclusive use for business compared to the entire square footage of the home or apartment.