If you're self-employed and file Schedule C, you may be able to deduct expenses for the business use of your home. To qualify, part of your home must be used regularly and, in most cases, exclusively for business.
Regular use means you use the area on an ongoing basis for your business. Exclusive use means the space is used only for business and not for personal activities.
You may qualify if your home is one of the following:
- Your business's principal place of business
- A place where you regularly meet with clients, customers, or patients during the normal course of business
- A location that includes a separate structure used for business, such as a detached office, studio, or workshop
- A space used regularly for qualified storage purposes
- A qualified day care facility
What Is a Principal Place of Business?
Your home may qualify as your principal place of business if it's where you conduct the most important activities of your trade or business and where you spend most of your working time.
When determining whether your home office qualifies, consider:
- Where your most important business activities take place
- Where you spend the majority of your business time
Meeting the principal-place-of-business test can make you eligible for the home office deduction even if you also work at other locations.
Exclusive Use vs. Personal Use
For most home office deductions, the area must be used only for business purposes. If a room or space is used for both personal and business activities, it generally doesn't qualify.
Example
You're an attorney who uses a den to meet with clients during the day. If the same den is also used for entertaining guests or family activities, the space does not meet the exclusive-use requirement, and you generally can't claim a home office deduction for that area.
What Expenses Can I Deduct?
If you qualify, you may be able to deduct the business portion of expenses related to your home, including:
- Real estate taxes
- Mortgage interest that is otherwise deductible
- Depreciation
- Homeowners or renters insurance
- Maintenance costs
- Rent
- Repairs
- Utilities
These expenses are generally deducted based on the percentage of your home used for business.
Expenses That Usually Don't Qualify
You generally can't deduct expenses that don't relate to your business space, such as:
- General landscaping services
- Painting or repairing rooms that aren't used for business
Special Rules for Storage and Day Care Businesses
Some businesses have special exceptions to the exclusive-use rule.
You may still qualify for a deduction if you use part of your home:
- On a regular basis for eligible business storage
- As a qualified day care facility
In these situations, exclusive use isn't required.
What If I Rent Out Part of My Home?
If you rent out part of your residence, different tax rules may apply. Depending on how the property is used, you may be able to deduct certain expenses related to the rental portion of the home.
Keeping accurate records of your home's business and rental use can help you claim the deductions you're entitled to and avoid issues if the IRS requests additional information.