To qualify for an income tax deduction for home office expenses, the IRS requires that you meet two tests—the place of business test and the exclusive and regular use test.
To pass the place of business test, you must show that you use a portion of your home as:
- The principal place for any trade or business you conduct, including administrative use. The IRS uses a two-part test to determine if a home office is a taxpayer’s principal place of business. The test takes into account the relative importance of business activities performed at each business location and the amount of time spent conducting those activities at each place of business.
- A place where you meet clients or customers in the normal course of business.
- In the case of a separate structure that is not attached to your dwelling unit, you must show that you use it in connection with your trade or business (i.e., it needn’t be your principal place of business).
The exclusive and regular use test requires that you use that portion of your home both exclusively for business and on a regular basis.
Depending on the nature of your work, your occasional home use is unlikely to qualify for a home office deduction since it is doubtful you would meet the first test (because occasional implies it isn’t your principal place of business). You are also unlikely to satisfy the second test (because occasional implies that the use of your home isn’t exclusive or regular).
Because the rules are complicated, it might be wise to review IRS Publication 587, Business Use of Your Home, or consult a tax professional.
If you have questions about the home office deduction, contact the Tax Experts at Henssler Financial: 770-429-9166 or experts@henssler.com.
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