Business Use of Home Deduction- Part One of Four- The Basics
The Business Use of Home Deduction may be a substantial deduction because it allows you to take a portion of your rent or mortgage interest, utilities and other business use of home expenses. There is an additional benefit to the business use of home deduction that is often overlooked; it may greatly increase your business mileage deduction. If you have an office in your home, that location would be considered a business location. The IRS allows business mileage between two business locations, therefore your trip to your first business meeting would qualify for deductible business mileage. If you consider how many times throughout the year you do this, this may become a significant increase in business mileage for the year.
The business use of home deduction is often misunderstood and there are very specific requirements you must satisfy to qualify for the deduction. This article is part of a four part series starting with the basics, meeting the requirements, business use of home as an employee and ending with how to calculate the business use of home deduction. In this article, we will focus on the basics.
Requirements to Qualify for the Home Office Deduction
To qualify for the home office deduction, you must satisfy three threshold requirements:
- You must be in business or an employee that must maintain their own office, and
- You must use part of your home exclusively for business (unless you store inventory at home or run a day care center), and
- You must use your home office for business on a regular basis.
If you satisfy all three threshold requirements, you must also meet any one of the following requirements:
- Your home office is your principal place of business, or
- You regularly and exclusively use your home office for administrative or management activities for your business, or
- You meet clients or customers at home, or
- You use a separate structure on your property exclusively for business purposes, or
- You store inventory or product samples at home, or
- You run a day care business from your home.