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Old 07-14-2008, 01:11 PM
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Which Taxpayers are qualified to take a Home Office Deduction?

Many taxpayers have always wanted to operate a small business out of their home and during tax season I get many clients who have expressed a temptation to “write-off” many of your household expenses. All taxpayers are seeking more clarification on this subject as what is deductible and what is not? Recently, the IRS has provided some advice to who can take a Home Office Deduction.

The Tax code states that "generally, expenses related to the rent, purchase, maintenance and repair of a personal residence are not deductible." But, if a taxpayer uses part of home for business purposes, then the tax law allows the taxpayer to be able to take a home office deduction.

What expenses can be deducted as part of the qualified Home Office Deductions?
According to the IRS, "expenses that can be deducted" as part of the home office deduction include the following;

a. the business portion of real estate taxes.
b. mortgage interest.
c. rent.
d. utilities.
e. insurance.
f. painting.
g. repairs.
h. depreciation.

But, in order to claim a business deduction, the IRS has stated the taxpayer must use part of his or her home;

1. exclusively and regularly as your principal place of business, as a meeting place to deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home.

2. on a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.

The IRS has additionally stated, that if a taxpayer "works as an employee, than the taxpayer would be entitled to can claim this deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home is not rented by the employer."

What does the term Exclusive Mean?
The IRS has defined the term “exclusive use” as meaning a specific area of the home that is used only for trade or business.

What does the term Regular Use Mean?
The IRS has defined the term “regular use” as meaning the area is used regularly for trade or business.

Source: Publication 587, Business Use of Your Home available at IRS.gov

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