By William Olsen, CPA, Co-Founder Deductr.
The IRS has two absolutes when it comes to the deductibility of home office expenses. The first is that your office area must be used EXCLUSIVELY for business. That means, for example, that what you designate as your home office area cannot be used by the kids for homework, your non-employee spouse for “surfing the web” or as an occasional “guest room” when family comes to stay. Also, beware what you are storing in your home office. Make sure everything in there is work related.
The second absolute is that your office area must be used REGULARLY for business. There is no hard and fast rule for how many hours a week constitute “regularly” as everyone’s situation is different. But it’s a good idea to track the time you actually spend using your home office in your calendar. This is easily done with a simple code like “HO” when tracking time spent using your home office.
Once those two rules are met, you may be able to deduct the costs associated with a home office even if you only use your office for administrative and management activities. These activities can include, billing customers, clients or patients; keeping books and records; ordering supplies; forwarding orders or writing reports; setting up appointments, etc.
Your home office could be considered your principal office if you have no other fixed location to conduct “substantial administrative or management activities of your trade or business,” and the first two “use tests” discussed above are met. If you have established your home office as a “principal place of business” you can deduct your mileage from your home to other work locations as deductible business miles instead of non-deductible personal commuting miles.
(It’s a good idea to work with a qualified tax professional to make sure your particular circumstances fit the rules described above.)