Losing the Home Office Space Means Losing the Tax Deduction, Too

Overtime2A recent article in Bloomberg reported that dedicated space for a home office is “less of a selling point” than it once was for home sellers. It’s appearing less often in real estate ads and marketing, and new-home developers are shifting toward open-floor plans containing flexible spaces, workspace nooks, and lots of handy electrical outlets.

That’s all very well as a reflection of how modern connectivity allows many people to work from their sofa, in their pajamas, or at just about any time and place in their home. But if you’re operating some sort of business principally from your home, it’s worth also considering what you might lose out on when tax time rolls around if you don’t have a dedicated home office space.

The home office tax deduction lets people who meet various legal requirements deduct a percentage of their home-related costs, such as utilities, rent, insurance, depreciation, mortgage interest, real estate taxes, and certain casualty losses, repairs, and improvements.

But here’s the key thing to remember: the deduction applies only if you regularly use part of your home exclusively for your trade or business. The IRS can be a stickler on this point–if, for instance, your office is also the family TV room, an auditor who notices that might not allow the deduction.

Any shared use of a room or equipment can be problematic. So if it gets to the point where you can’t point to ANY part of your home that’s solely used to run your business, say bye bye to the deduction.

Check out Nolo’s articles on Home Deductions for more on the exact rules and benefits of the home office tax deduction.