How to Deduct Your Home Business Space Expenses

Do you know how to claim your home office expenses as a tax deduction?  As promised a few days ago, I’ll give you the ins and outs of the process, and include some limits on home office deductions.

Here is the trick: In order for your home business expenses to be deductible, the space you use must be used (1) regularly AND (2) exclusively for your home business.

Regular Use. Regular use can be daily or weekly or monthly. But you will need to be able to prove that you use the business space regularly. If you have a computer and use the business space as an office to pay your bills every month, that can certainly be considered “regular.”

Exclusive Use. This one is a little more difficult. The space cannot be used for anything else at any time. Here’s an example: Let’s say you have a 2 car garage and you use 1 garage space for storing business inventory and you ship from this space. You can’t park a car in that space – EVER! You can’t even store a bicycle or lawn mower in that space. In another example, let’s say you use the dining room for your home craft business, but once a year you clean off the dining room table and use it for Thanksgiving dinner. You can’t deduct any home business expenses for that space because it wasn’t used exclusively for your home business.

The IRS looks very carefully at home businesses, to make sure the expenses claimed are truly for the business. If you want your home business expenses to be considered as deductible, you must use the space REGULARLY and EXCLUSIVELY for business.

I’m not a tax attorney or tax advisor, so check with your CPA or tax professional for details.