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The Home Office Tax Deduction

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Do  you use part of your home for your business? If so, you may be able to deduct  expenses for the business use of your home. These expenses may include mortgage  interest, insurance, utilities, repairs, and depreciation. The home office  deduction is available for homeowners and renters, and applies to all types of  homes, from apartments to mobile homes. There are a few basic requirements for  your home to qualify as a deduction

February 2, 2015
Author: NCH

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1.  Regular and Exclusive Use

To  qualify under the regular use test, you must use a specific area of your home  for business on a regular basis. Incidental or occasional business use is not  regular use. You must consider all facts and circumstances in determining  whether your use is on a regular basis. To qualify under the exclusive use  test, you must use a specific area of your home only for your trade or  business. The area used for business can be a room or other separately  identifiable space. The space does not need to be marked off by a permanent  partition.

2. Trade or Business Use

To  qualify under the trade-or-business-use test, you must use part of your home in  connection with a trade or business. If you use your home for a profit-seeking  activity that is not a trade or business, you cannot take a deduction for its  business use.

3. Principal Place of Your Business

You  can have more than one business location, including your home, for a single  trade or business. To qualify to deduct the expenses for the business use of  your home under the principal place of business test, your home must be your  principal place of business for that trade or business. To determine whether  your home is your principal place of business, you must consider:

  • The  relative importance of the activities performed at each place where you conduct  business, and
  • The  amount of time spent at each place where you conduct business.

Your  home office will qualify as your principal place of business if you meet the  following requirements.

  • You  use it exclusively and regularly for administrative or management activities of  your trade or business.
  • You  have no other fixed location where you conduct substantial administrative or  management activities of your trade or business. 

Additional  tests for employee use: If you are an employee and you use a part of your home  for business, you may qualify for a deduction for its business use. You must  meet the tests discussed above plus:

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  • Your  business use must be for the convenience of your employer, and
  • You  must not rent any part of your home to your employer and use the rented portion  to perform services as an employee for that employer.

If  the use of the home office is merely appropriate and helpful, you cannot deduct  expenses for the business use of your home.

For  a full explanation of tax deductions for your home office, refer to: Publication 587,  Business Use of Your Home.

For  more information on planning for taxes, call a Nevada Corporate Headquarters  Representative today at 1-800-508-1729.

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