If you are self-employed or an employee and use your home for business, you may be able to deduct some expenses. There are very specific requirements. In order to deduct these expenses, part of your home must be used regularly as well as exclusively for business in one of the following ways:
- It must be the principal place of your business or
- The place where you meet with customers or clients during the normal course of business activity, or
- It must be in used in connection with your business if you use a separate structure that is not attached to the home.
Only the portion of your home used for business can be applied towards expenses. Therefore, the total cost of the expense can only apply to the portion of the home used for the business activities.
- You can only deduct expenses if the location is used solely for business activities.
- You can only deduct the portion as it applies to that portion of the home, generally based on a percentage of the total cost as it relates to the entire home.
- In the case of day care facilities recognized as such, the exclusive is not a requirement.
Many expenses can apply here, including a portion of your deductible mortgage interest, rent, real estate taxes, utilities, insurance costs, casualty losses and even repairs and maintenance. You cannot deduct costs related to the upkeep and maintenance of the entire building or to landscaping.
For more information on businesses in homes and deductions, consult Publication 587, Business Use of Your Home or contact your tax professional to provide more specific guidance.
