Academic journal article Journal of Accountancy

Home Office Deduction

Academic journal article Journal of Accountancy

Home Office Deduction

Article excerpt

With unemployment still near the highest rate in decades, it is not surprising to find many people working out of their homes. Now may be a good time to review the criteria for claiming a deduction for the business use of part of a person's residence.

[check] Your home office must be used in a trade or business activity. You cannot take a deduction if you use your home for a profit-seeking activity that is not a trade or business. For example, if you use part of your home to manage your personal investments, you cannot take a home office deduction.

[check] The home office must be used regularly and exclusively for business. You must regularly use a room or other separately identifiable area of your home only for your business. You do not meet this requirement if you use the area for both business and personal purposes. For example, an attorney who writes legal briefs at the kitchen table cannot claim a home office deduction for the kitchen.

You do not have to meet the exclusive-use test if you use part of your home to store inventory or product samples or as a day care facility.

[check] Your home office must be one of the following:

* Your principal place of business. Your home office also will qualify as your principal place of business if you use it regularly for administrative activities and you have no other fixed location where you conduct substantial administrative activities; or

* A place to meet with patients, clients or customers in the normal course of your business. Using your home for occasional meetings and telephone calls is insufficient; or

* A separate structure not attached to the dwelling unit used for trade or business purposes. …

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