Multiple Business Use of Home Office
If you use a home office for more than one business, you need to be sure that the home office tests are met for all businesses before you claim the deductions or the IRS will disallow them.
More Than One Trade or Business
The same home office can be the principal place of business for two or more separate business activities.
Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. You must use the home office exclusively and regularly for one or more of the following purposes to qualify for Business Use of Home:
- As the principal place of business for one or more of your trades or businesses.
- As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses.
- If your home office is a separate structure, in connection with one or more of your trades or businesses.
You can use your home office for more than one business activity, but you cannot use it for any non-business (personal) activities.
Multiple Business Use of Home Example: Sarah is employed as a teacher at a school in San Diego. Her principal place of work is the school itself, which provides her office space to do her school work.
She also has a business from home in which she makes custom jewelry. All her work for her jewelry business is done in her home office and the office is used exclusively for that business. If she meets all other tests, she can deduct expenses for the business use of home for the jewelry business.
If Sarah also uses her home office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the business use of home deduction.
As an employee, Sarah must also meet the “convenience-of-the-employer” test to qualify for the deduction. She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity.
As you can see, by the IRS requiring that a home office be used “exclusively” as a principal place of business or place for seeing clients, patients, or customers, the guidelines impose an “all-or-nothing” test.
For a move comprehensive overview of the IRS Business Use of Home, read IRS Publication 587.