If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. As we always recommend: Use this information for reference but don’t make tax-related decisions without first consulting with your trusted financial and tax advisors.


Simplified Option

For taxable years starting on, or after, January 1, 2013 (filed beginning in 2014), there has been a simpler option for computing the business use of your home. The standard method (below) has some calculation, allocation, and substantiation requirements that are complex and burdensome for small business owners. This simplified option can significantly reduce recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.

Regular Method

Taxpayers using the regular method (required for tax years 2012 and prior), instead of the optional method, must determine the actual expenses of their home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the regular method, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.


Also on SmallBusiness.com | Cool, clever and idea-Inspiring small business and home office workspaces


Requirements to Claim the Deduction

Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:

1. Regular and Exclusive Use

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.

2. Principal Place of Your Business

You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.

Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.

Additional tests for employee use

If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:

  • Your business use must be for the convenience of your employer, and
  • You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.

If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.


For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find:

  • Requirements for qualifying to deduct expenses (including special rules for storing inventory or product samples).
  • Types of expenses you can deduct.
  • How to figure the deduction (including depreciation of your home).
  • Special rules for daycare providers.
  • Tax implications of selling a home that was used partly for business.
  • Records you should keep
  • Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home, required if you are self-employed and claiming this deduction using the regular method).

The rules in the publication apply to individuals.

12
Owning a Small Business and 14 Other Red Flags Increasing The Odds You’ll be Audited

There’s no sure way to avoid an IRS audit, but here are things the IRS looks for in selecting returns they consider.

13
How to Keep From Overpaying Unemployment Insurance Taxes

Each year, many businesses pay more in unemployment insurance taxes than they should. Here is how to avoid being one of those companies.

14
How to Save Tax and Personal Financial Data Without Having Your Identity Stolen

The IRS recommends you keep tax forms and supporting documents a minimum of three years to a maximum of seven years.

15
How Much Tax You’ll Pay on Your $1.3 Billion Powerball Winnings

Before you start plans to expand your business, you may want to sit down with a team of your most trusted legal, tax and financial advisors.

16
A Dozen Business-Related Tax Incentives in the 2016 Budget, Spending Bill

The House of Representatives overwhelmingly passed the first of two bills that will avoid a government shut-down and make permanent a long list of tax provisions

17
A Small Business Year-end Tax Tip That Helps Throughout the Year

This tax calendar from the IRS that can be viewed online or via your computer or mobile device.

18
Six Tax Tips for Year-end Charitable Giving | 2015

Advice from the IRS about different types of year-end giving and how they can impact your taxes.

19
Small Business Tax Day Countdown: A New Taxpayer Bill of Rights

Adopted by the IRS in 2014, the Taxpayer Bill of Rights applies to all taxpayers, individuals or businesses, in their dealings with the IRS.

20
Small Business Tax Day Countdown: Good News, Bad News on How-to Find a Good Tax Preparer

How to find a good tax advisor and tax return preparer for your small business.

21
Affordable Care Act Tax Information From the IRS

The IRS provides a wide range of resources (all are published as PDFs) related to the Affordable Care Act and taxes.

22
Small Business Tax Day Countdown: Last Minute Tax Help You Can Find on the IRS.gov Website

Avoid long waits on-hold or in-line. The IRS.gov website has answers to many of your tax questions, printable tax forms and publications and more.

23
You Must Pay Taxes on Time, but Here are Ways to File an Extension for Turning in Your Tax Forms

Three ways to request an automatic extension of time to file your U.S. individual income tax return. (But your taxes are still due on time.)

24
Small Business Tax Day Countdown: While Tax Preparation is Rarely Free, Online Tax Filing Is

For small business owners and self-employed, the price at a free online tax filing service isn’t free. The price begins at $104.99 using TurboTax, for example.

25
Know the Difference Between an Employee and an Independent Contractor

Taxes and benefits hinge on whether or not a provider of a service is determined by the IRS and other federal and state agencies to be an employee or independent contractor.

26
Rollover Business Startups (ROBS) are Risky, May Violate Tax Laws

Use of a complex strategy to transfer IRA savings into funds to acquire a startup is not only risky, the IRS is challenging it.

27
New Ways States are Finding Small Business Tax Evaders

Following the IRS lead at the federal level, states are looking for ways to find small business owners and the self-employed who are evading state tax laws.

28
Tax-free Commuter (Even by Bicycle) & Parking Expenses

Even if your company does provide parking and commuting expenses as a benefit, they can be paid for with pre-tax money.

29
Add Up Your Healthcare Premiums With This ACA Tax Subsidy Calculator

The Kaiser Family Foundation created this calculator to illustrate health insurance premiums and subsidies for people purchasing insurance on their own in new health insurance exchanges