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Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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Explain the office in home deduction. Explain when it can

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Explain the office in home deduction. Explain when it can be used and when it can't. What's the biggest advantage and what is the biggest disadvantage?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.
Hi and welcome to Just Answer!

Whether you are self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction. Here are six things the IRS wants you to know about the Home Office deduction

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

--as your principal place of business, or
--as a place to meet or deal with patients, clients or customers in the normal course of your business, or
--in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

2. For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.

3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on line 30 of Form 1040 Schedule C, Profit or Loss From Business.

6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.
For more information see IRS Publication 587, Business Use of Your Home -

certain additional deductions that would either ordinarily be personal and unallowable.

increased transportation deduction because home-office would be a place of employment
reduction of Self-Employment tax and Adjusted Gross Income resulting in increased other deductions based on AGI.

part of the home sale exclusion becoming subject to capital gains,
reduced benefits from retirement plans and social security.

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