Business Use of Home
Whether you are employed or self-employed, you may be able to deduct certain expenses for the part of your home you use for business purposes, despite the general denial that exists on the deductions of expenses for the business use of household.
To deduct expenses for the business use of your home, part of it has to be used as one of the following:
- Exclusively and regularly as a principal place of business for your trade or business;
- Exclusively and regularly as a place where you meet and deal with their patients or customers in the normal course of your trade or business or
- A separate structure not attached to your home you use exclusively and regularly in connection with your trade or business
- Regularly for certain storage use
- To use lease
- As childcare facilities
Using Home for Commercial and Personal Purpose
When corresponding requirement for exclusive use, you can not deduct business expenses for a portion of your home that is used for both personal and commercial purposes. For example, if a lawyer uses the home study to prepare summaries of legal cases and for personal purposes, you can not deduct any expenses for the business use of your home. In addition, to deduct expenses for the business use of your home, according to the requirement of principal place of business, you must determine that your home is the principal place of your trade or business after considering where your most important activities carried out and where to spend most of the time.
Home as Principal Place of Business
In addition, a portion of your home may qualify as your principal place of business if you use it for administrative or management activities of your trade or business and you have no other fixed location where he conducts substantial administrative and management activities for that occupation or business. An employee may deduct the cost of business use of your home only when part of the home in question and usually only used for commercial purposes and that such use is convenient to the employer.
You can also take deductions for the use of a dwelling for commercial storage and always when the home is the only fixed location that the business or by the habitual use of the home as a nursery. In these cases, the exclusive use is not required. For more information, see Publication 587 ,Business Use of Your Home (Business Use of Your Home).
Deductible Expenses for the Business use of the Home
Deductible expenses for the business use of the home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. You can not deduct expenses for the general care of the garden or for painting a room not used in the business.
Historically, the deduction for the business use of your home is calculated by allocating the total housing costs to the percentage of the home used for business. Generally, this time to the amount of space is under the surface, but qualified childcare providers that do not use your home exclusively for business purposes also need to calculate the percentage based on the applicable portion of the house use for business. For taxpayers who are self-employed and to submit the Form 1040 Schedule C, Profit or Loss from Business (Sole Propietorship) (Profit or Loss From Business (Sole Proprietorship), in English, this deduction is first calculated on Form 8829, Expenses for Business Use of Your Home (expenses for the business use of your home).
Using your Home for Business Purposes
Even though the deduction can be calculated in the same manner as before, many taxpayers may determine that the new optional safe harbor method less complicated. From 2013, Revenue Procedure 2013-13 allows taxpayers eligible to use a set fee of $ 5 per square foot of the part of the house is used for business (up to 300 square feet) to calculate the deduction commercial home use.Under this safe harbor method, depreciation is considered zero and the deduction is claimed directly on Schedule C of Form 1040 and Form 8829 is not used.
Instead, it is stated directly in two places of Annex C to the taxpayer fills the square footage of the home and the square footage of the office and a preference to use the safe harbor option shown. Deductions for housing that would be permissible in any case regardless of commercial use (such as qualified residence interest, property taxes and casualty losses) are allowed in full in Annex A of Form 1040, Itemized Deductions(itemized deductions), in English, as allowed under the regular method. For more information, seeHome Office Deduction (Deduction for home office) and Simplified Option for Home Office Deduction (Simplified option deduction for home office).
Calculating Business Deductions
Whichever method you use to calculate the deduction, you can not deduct business expenses that are greater than the limitation on gross income. Under the regular method to calculate the deduction, some business expenses can be transferred to the next year, but will be subject to the gross income limit for that year. However, under the safe harbor method there is no provision to transfer the costs but you may choose to use or not use the safe harbor method as preferred in a given year.
IRS Documentation on Business Expenses
If engaged in agricultural activities or employee, use the worksheet in Publication 587 , Business Use of Your Home (Including Use by Daycare Providers) (Business Use of Your Home (including use by daycare providers)) to figure your deduction. If you are an employee, you must itemize deductions on Schedule A (Form 1040) to claim expenses for the business use of your home. Farmers claim their expenses on Schedule F (Form 1040) .
IRS Information about Deducting Home Use for Business
The Publication 587 contains detailed information about the rules on the business use of your home, including how to determine if your home office qualifies as your principal place of business.