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Tax Preparation online help - Home Office Tax Expenses

This section of Tax Preparation online help deals with home office tax expenses deduction. If you use a portion of your home for home office business, you may be able  to deduct a portion of your rent or depreciation on your home office as well as other home office tax expenses. These home office expenses are collectively referred to as a home office irs tax deduction . If you are claiming a home office IRS tax deduction, you must attach IRS tax Form 8829 to your income tax return.

How to qualify for home office expenses deduction

To qualify for a tax deduction for home office tax expenses, your home office must meet two home office expenses deduction tests.

Home office expenses deduction test 1: principal place of business test

you must use the home office exclusively as an office and:

  • your home office must be the principal place of business;

  • your home office must be used by patients, clients, or customers in the normal course of your business; or

  • your home office must be used in connection with your business if the home office is a separate structure not attached to the dwelling unit.

In determining whether you meet this home office expenses deduction standard, the IRS looks at the relative importance of the activities performed at each business location and the amount of time spent at each location. Naturally, for a home business to be the principal place of business, you must either spend more time there or spend your important time there. If there is no other fixed location of the trade or business but the home office where the taxpayer conducts substantial administrative or management activities of the trade or business, then the home office is the principal place of business.

The IRS has indicated that it will look at the "relative importance" test first to determine if a home business qualifies. If this IRS tax relative importance test does not produce a definitive answer, then the amount of time spent at each home office location is the determining factor. This IRS tax relative importance test may result in a taxpayer having no specific home office that can be deemed the principal place of business. If this is the case, the tax payer will not qualify for home office tax expenses deduction.

Click here to go to Home office tax expenses deduction test 2 and Home office tax expenses deduction FAQs.

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