You may have heard that your home office expenses may not be deducted if you already have an office outside the home. This is a common misconception. While it is important to carefully examine the language of the Tax Code, in most instances it is perfectly permissible. IRS publication 463 states, “You can have more than one business location, including your home, for a trade or business.” Sounds good, but what qualifies as an administrative office for your business? The IRS in publication 587 says: “Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements:
- You use it exclusively and regularly for administrative or management activities of your trade or business
- You have no other fixed location where you conduct substantial administrative or management activities of your trade or business”
Note the word “substantial,” because therein lies the key strategy to having your home office qualify: Do the bulk of your administration work at home, rather than in your workplace office. Publication 587 goes on to list several deductible activities that are administrative and managerial in nature, including:
- Billing customers, clients, or patients
- Ordering supplies
- Setting up appointments
- Forwarding orders or writing reports
Simply follow the guidelines above, and the benefits of the home office deduction can be yours.