Principle Place of Business
To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business.
You can have more than one business location, including your home, for a single trade or business.
Principal Place of Business Requirements
To determine whether your home is your principal place of business, you must consider:
- The relative importance of the activities performed at each place where you conduct business.
- The amount of time spent at each place where you conduct business.
Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements:
- 1. You use it exclusively and regularly for administrative or management activities of your trade or business.
- 2. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
If your home cannot be identified as your principal place of business you cannot deduct home office expenses. There are still other ways to qualify to deduct the home office expenses.
Place to Meet Patients, Clients, or Customers
If you meet or deal with patients, clients, or customers in your home in the normal course of business you can deduct the expenses for the part of your home used exclusively and regularly for business if you meet the following tests:
- You physically meet with patients, clients, or customers on your premises.
- The use of your home is substantial and integral to the conduct of your business.
Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement.
Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. You must physically meet with your clients or customers, not just send them e-mails and talk to them via phone conversations or fax.
Principle Place of Business Example: Lori, a self-employed attorney, works 3 days a week in her city office. She works 2 days a week in her home office used only for business. She regularly meets clients there. Her home office qualifies for a business deduction because she meets clients there in the normal course of her 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 doesn’t have to be your principal place of business or a place where you meet patients, clients, or customers.
Principle Place of Business Example: Greg and Katie operate a floral shop in the town of Ventura. They grow the plants for their shop in a greenhouse behind their home. They use the greenhouse exclusively and regularly for their business. Thus, Greg and Katie may deduct the expenses for its use, subject to the deduction limit.
If your gross income from your business is less than your home business expenses, your deduction for certain expenses for the business use of your home is limited. Visit our Home Business Deduction Limit page to learn more!
Multiple Business Use of Home Office
If you use a home office for more than one business, make sure that the home office tests are met for each of your businesses before you claim the deduction. If one business use qualifies and another does not, the IRS will disallow deductions including the one that qualifies for home business use.
Principal Place of Business Final Note!
As a final note, be sure to have evidence that you have actual office facilities. Furnish the room as an office; meaning have a desk, files, and a phone used only for business calls. Be sure to also keep a record of work done and business visitors.