If you use part of your home for business purposes, then you are likely eligible for a home office deduction. This deduction applies to any property providing basic living accommodations with the exception of areas exclusively used as motels, inns, or similar establishments. Today we are providing an overview of the basic requirements to qualify.
Regular and Exclusive Use of Home Office
- An area of the home must be strictly dedicated for business (there are exceptions if you are storing inventory or running a day care center)
- The home office must be used on a continuous basis for business
- Part-time or seasonal businesses may only deduct expenses incurred during times of operation
Main Place of Business
- A free-standing structure on the property, such as a garage or studio, qualifies even if it is not your principal place of business; however, this structure must be used exclusively and regularly for business
- A substantial amount of administrative/management activities must be conducted in your home office
- If you conduct business outside of home but still use your home substantially, you may still qualify
Employee Use and Claim of the Home Office Deduction
Employees who use part of their home for business also qualify for home office deductions if they meet the above requirements as well as the requirements that follow:
- The employee’s business use of the home is for the employer’s convenience
- The employee must not rent part of the home to the employer and use the rented space to perform services as an employee
- The employee’s business use of the home is maintained as a condition of employment
Additional Information
If you drive for business or are an Uber/Lyft driver, you likely qualify for a larger mileage deduction. The travel distance between your home and your outside office is not deductible. Therefore, if you are an Uber driver, picking up your first ride from home and driving back home from your last drop-off are not deductible. However, if you are driving to/from a home office that is your principle place of business, the miles are deductible.
Not everyone qualifies for this deduction but many fail to take advantage of it. For more information, visit www.irs.gov/home-office-deduction or www.irs.gov/p587.