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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
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Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I have rented two BHK apartment of 1210 sq ft for $1700

Customer Question

I have rented two BHK apartment of 1210 sq ft for $1700 monthly rent. I use one bedroom and bath for office. The one bedroom or office space coming around 260 sq ft. Occasionally I use living room for business meetings but 1 Bed for daily business use. I thought of putting 40% of rent as business expense. Please suggest how to calculate business expense in this case..
Submitted: 9 months ago.
Category: Finance
Expert:  R. Klein, EA replied 9 months ago.

Thank you for your tax question today.

In order to claim an office in home properly, the office use must meet specific IRS tests:

1. The area must be used EXCLUSIVELY for business purpose. It cannot be shared time/use for another personal purpose, such as for visitors sleeping area, dining area, etc.

2. The area must be used regularly for business. Using the bedroom 3 days a month would not likely be "regular" use.

3. The Office in Home must be used for your own business if self-employed and if you are an employee, the office must be used for the EMPLOYER'S convenience, not for your own convenience.

Therefore, if the one bedroom area of 260 sf meets all three tests, you can claim 260sf / 1210sf or 21.5% as business-exclusive area. You would be able to deduct, using Form 8829, this ratio of your rent, utilities and related expenses. If you are self-employed using Schedule C, this amount will feed into Sch C. If you are an employee, the allowable amount feeds into Schedule A, but the allowable amount is reduced by an amount equal to 2% of your Income.

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