You have a desk, a computer, a phone and a personal trashcan. Does that qualify as a home office? If you watch TV while you work, can you deduct your cable bill? What are the rules -- and what are the consequences if you break them?
Lots of people work at home. A teacher may bring home a pile of papers to grade; a business executive may spend his weekend writing a report; a salesman may sit down at his home computer every night and log his miles and expenses. But even if you have a specific place in your home for activities such as these, you may not be able to claim a home office deduction on your taxes.
The IRS has very strict rules on home offices. If you're considering taking a home office deduction, ask yourself these questions first:
Do you have a room that you use exclusively for business?
Your kitchen table, the computer in your basement recreation room or a desk in the corner of your bedroom probably will not qualify. You must have a part of your home that is used only for business. Your kitchen table, for example, is obviously used for other purposes and therefore is disqualified as a home office location.
Do you have an office somewhere else?
If your employer provides an office and does not require you to work at home, you can’t claim a home office deduction. Sure, you might bring home projects to finish up, but your main place of work is elsewhere.
Do you use your home office on a regular basis?
If you only use your home office occasionally, you can't take a deduction for it -- even if you don't use the area for any other purpose.
Does your job require a home office?
In order to take the home office deduction, your home office must be your principal place of business or the place where you regularly meet with customers.
Because the rules are so stringent, you should consult your tax advisor regarding the ins and outs of the home office deduction. If you qualify, it can be a great tax break. You can deduct a percentage of your utility bills, mortgage payments, home repairs and other costs. However, if you bend the rules you could be subject to fines and penalties. Even if your claim is legitimate, the home office deduction can be a "red flag" to the IRS, triggering an audit.
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