How Do You Qualify For The Deduction?
Essentially there are two tests you must pass for your home office to actually count as a home office:
1. You must use your home office regularly and exclusively for business
In order to take the full deduction, the office itself must be entirely used for business and nothing else.
2. Your home office must be your principal place of business
To qualify as a principal place of business, you must do the most important part of your work in that office OR you must do your administrative or management activities in that office AND you can’t perform those admin and management activities in another office.
How Do You Calculate The Deduction?
Again, there are two methods for calculating the deduction but any “reasonable method†will suffice. I recommend that you go with the percentage use method: measure the square footage of the home office area and divide by the total square footage of your home. Why that one and not the percentage based on the number of rooms? Publication 587 explicitly spells out the percentage rule (page 25) I just explained so it’s a “safer†bet.
How Much Of A Deduction Can You Get?
Here’s the fun part… you can deduct a whole bunch of stuff (whatever percentage you calculated above) like mortgage interest to real estate taxes (jackpot!). Everything is pretty self-explanatory and explained on Form 8829 Expenses for Business Use of Your Home in plain English.
