When Can You Claim the Home Office Deduction?
Many entrepreneurs start their business from their home, garage, or a basement. However, not everyone meets the criteria to claim the home office deduction. There is a simple explanation when you can use home office deduction.
IRS states that you have to meet 2 conditions:
1. Regular and exclusive use. This rule states that the space that you use for a home office must be only for a business use. For example, you can not use your guest bedroom for the office and for your guest to stay at the same time, even if it is just for a few days. You cannot claim this deduction if you do not have specifically dedicated office space. In other words, the home office should be an actual office and used only for a business purpose.
2. Principal place of business.
IRS states that you do not need to meet your clients only at your home office. However, your home office must be your principal place of business. According to the IRS, you can claim it as the principal place of business only if you use it exclusively and regularly for administrative or managing activities. For example, contacting and billing clients, or bookkeeping.
There are always exceptions to the rules.
The first one is if your business is the care service. For example, the part of your house is allocated to childcare, elderly or handicapped individuals care place. If you have a license, certification or approval as a daycare center, you can claim this business deduction.
The second exception is if you use the office for storage of inventory or product samples which your business sells.