Q:

Can I take the home office deduction on my income taxes?

A:

We’re finally tackling a question that doesn’t depend upon your local laws. The home office deduction is strictly controlled by the IRS, applying federal tax laws and regulations.

If you are a self-employed home office warrior, your deduction is pretty easy to determine. You can deduct the portion of your home that you use regularly and exclusively: 1.) as your principal place of business, or 2.) to deal with clients and customers. If you use a separate structure exclusively and regularly, you can deduct expenses for it.

What does this mean? If you have a dedicated area in your home that you use only for work, you can might be able to deduct it. But you also have to meet the other part of the test. It either has to be the place where most of your business is done, or you have to physically meet clients there.

If you aren’t self-employed, there is one more hurdle you must jump to qualify for the home office deduction. Your working at home must be “for the convenience” of your employer. If you have a desk at your employer’s office, but you choose to work at home to save gas and commuting time, you don’t qualify for the deduction.

Finally, if you use a portion of your home for a daycare business or to store business inventory or product samples, there are special rules in play.

If you own a home business, you should be carefully in tune with your possible tax deductions. This can save you some serious money at tax time. And remember that April 1st isn’t the time to think about taxes. Plan for them during the year, and tax time won’t be stressful.

For more information about the home office deduction, check out Tax Tip 2008-53 or Publication 587 (PDF) - Business Use of Your Home (Figure A on page 4 is particularly helpful), both from the IRS.

This is a bi-weekly feature at Home Office Warrior. Now is your chance to send questions to an experienced attorney. Submit your questions to Andrew at andrew@homeofficewarrior.com or leave your comments here.

Disclaimer: Andrew Flusche is a licensed Virginia attorney, but these posts do not constitute legal advice, nor do they create an attorney client relationship. For legal advice, consult an attorney licensed in your jurisdiction.