The Principal Place of Business Rule must be met met
for you to deduct Home Business Expenses



Principal Place of Business Requirements
You can have more than one business location, including your
home, for a single trade or 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.  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.

Separate Structure
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. 

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.

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!

 

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