How to Qualify for the Home-Office Tax Deduction

Americans are increasingly working at home, but many fail to claim tax deductions for home offices; they fear it will make them a target for an audit or that it will cost them when they sell their home.

That could be a mistake. The deduction can save you a lot of money if you're willing to plan carefully and keep the right records. If you're single and self-employed, with a taxable income of $60,000, you're in the 25% tax bracket. With the self-employment tax at 15.3% (for Social Security) and typical state income taxes of 5% to 6%, your tax rate is in the 45% range.

"Every dollar you can legitimately deduct saves you 45 cents," says Jeff Levine, a CPA with Alkon & Levine in Newton, Mass. ...