Tax Deduction For Business Use of A Home

Many individual taxpayers do some income producing work out of their homes and feel that they should be allowed to deduct part of the costs of their home on their income tax returns. For example a bankruptcy lawyer might work on some of his briefs on his home computer on weekends. However, the tax law limits the situations in which the deduction is available.

Basically a taxpayer may take a deduction for business use of the home, if it is the principal place of a taxpayer’s business, if the home is used to meet clients or customers, if the home is used to store inventory for a retail or wholesale business ,or the home is used to provide day care services. Also a detached structure from the main residence used for business purposes such as an office over a detached garage can qualify.

Each category also has specific requirements that must be met. For example space must be used exclusively for the business purpose to be deductible as a principal place of business, as a place to meet customers, or as a detached structure from the main residence. A space deducted for meeting customers must involve actual physical meetings, not merely phone calls or emails.