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How to Pass the 'Part-Time' Tax Test for a Home Office Deduction

According to the IRS, you must meet three main requirements to be eligible for the home office tax deduction. You must use a portion of your home exclusively and regularly:

  • As your principal place of business.
  • As a place to meet or deal with clients/customers in the normal course of your business.
  • In any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

The IRS also allows you to deduct expenses for the business use of your home for some special situations. To qualify for the tax deduction, you must use part of your home:

  • For certain storage use on a regular basis.
  • For rental use.
  • To operate a daycare facility.

To be eligible for the home office tax deduction, the IRS requires that you use a part of your home regularly and exclusively for conducting business. In other words, you cannot put a computer in the guest room and call it a "home office." You also cannot allow family members or friends to use your home office for their own projects.

To qualify, your home office must be a separate room or identifiable area from which personal activities are completely excluded.

The IRS is very strict about the exclusive-use requirement, although there is less information when it comes to what defines "regular use." Conducting business from your home office at least a few hours each day is probably enough to fulfill the regular-use requirement.

Principal place of business and/or a place to meet with clients

To be able to deduct the expenses associated with the business use of your home, you must demonstrate that you use your home office as your principal place of business. This means that the office portion of your home must be used extensively and consistently for your business activities, or as a place where you meet with your clients/customers in the normal course of your business.

Note that even if you also conduct business at another location, you can still deduct the expenses associated with the part of your home used exclusively and regularly for business. This means that your home office must be your principal place of business, but not necessarily your principal office. A separate or detached structure (such as a garage or studio) may qualify as a home office if it is used solely and regularly for business.

Additional rules for employees

The requirements discussed above apply to anyone who wants to claim the home office tax deduction, including people who are self-employed, as well as employees. If you are an employee (of a company or other person), it is important to know that there are additional qualifications for the home office deduction.

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