Can I take the Home Office Deduction?
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.
The home office deduction is available for homeowners and renters, and applies to all types of homes, from apartments to mobile homes.
Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
There are two basic requirements for your home to qualify as a deduction:
Requirement #1. Regular and Exclusive Use.
You must regularly use part of your home exclusively for conducting business. For example, if you use an extra bedroom to run your online business, you can take a home office deduction for the extra bedroom.
Requirement #2. Principal Place of Your Business.
You must show that you use your home as your principal place of business.
If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business.
You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.
Additional tests for employee use of a home office
If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:
- Your business use must be for the convenience of your employer, and
- You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
If your use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
Where do I enter Home Office information for my business in TurboTax?
When you use TurboTax to prepare your taxes, we’ll ask you questions about your business expenses, including your home office expenses, figure out how much you can deduct, and fill in all the right forms for you.
If you've already gone through the step-by-step interview and want to jump directly to the entry screen for the Home Office Deduction, follow these directions.
Home & Business Edition
- Select the Business tab.
- Select the Business Income and Expenses subtab.
- Select Explore on My Own.
- Scroll down the screen until you see the Business Income and Expenses group.
- Click on the Start/Update button to the right of the Profit or Loss from Business category.
- Follow the prompts.
Basic, Deluxe, and Premier Editions
- Select the Federal Taxes tab.
- Select the Wages & Income subtab.
- Select Explore on My Own.
- Scroll down the screen until you see the Business Items group.
- Click on the Start/Update button to the right of the Business Income and Expenses (Sch C) category.
- Follow the prompts.
Where do I enter Home Office information as an employee in TurboTax?
When you use TurboTax to prepare your taxes, we’ll ask you questions about your employee job-related expenses, figure out how much you can deduct, and fill in all the right forms for you.
If you've already gone through the step-by-step interview and want to jump directly to the entry screen for this topic, follow these directions.
- Select the Federal Taxes tab (the Personal tab in the Home & Business edition).
- Select the Deductions & Credits subtab, select Explore on My Own.
- Scroll down the Deductions & Credits screen until you see the Employment Expenses group.
- Click on the Start/Update button to the right of the Job-Related Expenses category.
- Follow the prompts.
Home Office FAQ
For more detailed information regarding tax deductions for your home office, please see IRS Publication 587, Business Use of Your Home.
1. I manage rentals from my home, but TurboTax does not let me deduct my home office. Why not?
Passive income does not qualify for the home office deduction, and the IRS considers rental property income as passive.
To qualify for a home office deduction you would need to have a small business (Schedule C), a farm/ranch (Schedule F), or be an employee who is required by the employer to maintain a office in their home.
2. I entered the info for the home office deduction but my taxes stayed the same. How come?
Most of the expenses associated with the home office deduction cannot create or increase a loss for your business.
However, deductible mortgage interest, real estate taxes, and casualty losses can create or increase a business loss, while other expenses including rent, utilities, maintenance, and insurance cannot.
These disallowed losses can be carried over to the following year until they can be used.
3. If I have two businesses, can I take the home office deduction twice?
Yes, if you meet all of the requirements for both businesses. If you have a separate space for each business then you will just do the home office process twice.
If you have two businesses that share the same office space, then you will need to split the space and expenses between the two companies.
4. I do most of my work at the homes and businesses of my clients. Can I still take a deduction?
Even though you perform work at clients' homes (as a plumber or IT technician, for example), if you perform administrative tasks from your home and meet the other home-office requirements, then you would likely qualify.
5. Can I claim the home office deduction for my investing activities?
If you are classified as a trader and meet all of the requirements for the home office deduction, then probably yes.
If you are managing your investments rather than working as a trader, then this would not be classified as a business, and you would not meet the requirements of the home office deduction.
6. As a teacher, can I deduct a home office since I work there at night and weekends?
If you are a classroom teacher at a school with a building then you have a normal place of business that is not your home.
However, if you taught for an internet based school and had no other place of business, then you would be able to take a deduction if you meet the other requirements.
7. I only worked part of the year from home. What can I deduct?
If you meet the office in home requirements for only part of the year, you can still take a portion of the expenses as a deduction.
For example, if you only worked half of the year from home, then you would take half of what you would take if you had do this for the entire year.
8. Do I have to depreciate my home?
No, but you might as well.
If you take the home office deduction, depreciation is allowed.
So, even if you don't use it, you will have been deemed to have taken it by the IRS. This comes into play when you sell your home and need to recapture the depreciation if you have a gain on the sale.
9. Can a percentage of my office be used in the IRS definition of exclusively?
You can use whatever portion of your home that meets the IRS exclusive requirement, even if the area is a small portion of a larger area.