1. Generally, in order to claim a deduction
for a home office, you must use a part of your home exclusively and
regularly for business purposes. In addition, the part of your home that
you use for business purposes must also be:
• your principal place of business, or
• a place where you meet with patients, clients or customers in the normal course of your business, or
• a separate structure not attached to your
home. Examples might include a studio, workshop, garage or barn. In
this case, the structure does not have to be your principal place of
business or a place where you meet patients, clients or customers.
2. You do not have to meet the exclusive
use test if you use part of your home to store inventory or product
samples. The exclusive use test also does not apply if you use part of
your home as a daycare facility.
3. The home office deduction may include
part of certain costs that you paid for having a home. For example, a
part of the rent or allowable mortgage interest, real estate taxes and
utilities could qualify. The amount you can deduct usually depends on
the percentage of the home used for business.
4. The deduction for some expenses is
limited if your gross income from the business use of your home is less
than your total business expenses.
5. If you are self-employed, use Form 8829,
Expenses for Business Use of Your Home, to figure the amount you can
deduct. Report your deduction on Schedule C, Profit or Loss From
Business.
6. If you are an employee, you must meet
additional rules to claim the deduction. For example, in addition to the
above tests, your business use must also be for your employer’s
convenience.
If you are an employee of a US or foreign corporation and qualify this deduction goes under miscellaneous deductions on Schedule A. If you are self employed it goes on your schedule C. You can get more information in IRS Publication 587 which can be downloaded here.
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