If you work from a home office you may be able to deduct the costs associated with that space as business expenses. However, the IRS has strict guidelines about what counts as a home office. Read on to find out more!
Regular and Exclusive Use
The first part of the IRS definition of “home office” concerns how you use the space that you want to claim. The space in question must be a dedicated and exclusive work space that you use regularly for business.
Very often, a home office is a separate room that you use only for work. However, it does not have to be a whole room. It just has to be used for business purposes and nothing else.
For example, if you have a multi-purpose room that you often work out of, that does not count as a home office. However, if you have a desk or other work area set up in a corner of that room, and you use that location as a dedicated and exclusive work station, then it could be recognized as a home office.
Principal Place of Business
Establishing regular and exclusive use is not the end of the road, however, when it comes to IRS-recognized home offices. You also have to prove that you your home office is your principal place of business.
If you work from home, it is usually fairly straightforward to meet this parameter. What if, however, you work in another location and have a home office that you regularly use?
In this case, the IRS will look at the frequency with which you use your home office. If, in the course of your daily work, you regularly use a space in your home for business meetings or other work-related duties, you may well be able to deduct home office expenses.
If you keep a home office but only use it a few times a month for work duties or meetings, the IRS will most likely not recognize that space as a home office for deduction purposes.
When You Are Employed by a Third Party
Individuals who are employed by a third party but work from home must meet the above criteria and satisfy these additional parameters:
- Working from a home office must be for the convenience of your employer. This means it must be beneficial for your employer, not just you, for you to work from home rather than working from the regular business location.
- You cannot rent your “home office” to your employer and then use that rented space to perform your work duties.
Questions? Call Us!
Some elements of these rules are straightforward, but others are more subjective. If you have questions about the status of your home office space, call the team at Taxation Solutions, Inc. for assistance. We will be happy to go over home office parameters and to work with you regarding your specific situation.