Tax Tips: Home Office Deductions

Some employees don't work in an office, store or other business location. A good example is commission salesmen for out-of-state companies — they work out of their homes. They may be able to claim their home office as a miscellaneous deduction on Schedule A.

You can deduct a room, or part of a room, in your residence used as an office if it is:

  • used “regularly and exclusively” for your business needs,
  • your principal place of business or where you regularly meet or deal with patients, clients or customers in the normal course of your business, and
  • for your employer's convenience.

There must be a genuine business reason for the home office. Simply to make things easier for you and your boss is not sufficient reason to support a home office deduction.

If you have a legitimate home office you can deduct the portion of all the appropriate expenses of maintaining your home — real estate taxes, mortgage interest (acquisition debt only), homeowners insurance, water and sewer, gas and electric, heating oil and depreciation if you own the home (or rent and utilities if you are a tenant) — that applies to the area of the office. You would divide the square footage of the office area by the total square footage of the residence. Or if your apartment had five rooms and one was used exclusively as a home office you could claim one-fifth of the rent and utilities.

New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.

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