Do you qualify for an office in the home deduction?

Home office deductions are available only if the taxpayer qualifies under the very strict guidelines of IRC Section 280A. To qualify to claim expenses for the business use of your home, you must meet the following tests:

1. Your use of the business part of your home must be:

a. Exclusive-A specific area of your home used only for your trade or business. The area cannot be used for both personal and business purposes.

b. Regular-The area of the home used for a trade or business must be on a continuing basis not only occasional or incidental, even if used exclusively.

c. For your trade or business, AND

2. The business part of your home must be one of the following:

a. Your principle place of business-You can have more than one business location, including your home, for a single trade or business. Two factors are taken into consideration to determine the principle place of business.

i. The relative importance of the activities performed at each location.
ii. The time spent at each location.

b. A place where you physically meet with patients, clients, or customers in the normal course of your trade or business, or

c. A separate structure (not attached to your home) you use in connection with your trade or business.

The 1997 law expanded the principal place of business definition to permit home offices to qualify for deductions starting in 1999 if:

1. The taxpayer uses the home office to conduct administrative or management activities of his or her trade or business, and

2. The trade or business has no other fixed location where the taxpayer conducts substantial administrative or management activities.