I work out of my home. Can I take the home-office deduction?

First let's determine if you qualify, because merely working out of your home is not the determining factor. Keep in mind that the IRS has time and time again warned taxpayers and tax preparers that bogus home-office deductions will be dealt with harshly.

Whether you are self-employed or an employee, you need to be able to answer "yes" to each of the following questions.

  1. Have you identified a specific space that does not change in your home for your work?
  2. Is this space used solely for the purpose of your work and not at all for personal purposes?
  3. Is this space identified used on a regular and continuous basis?
  4. Is the area used in one of the following ways:

    • As the principal place of business carried on by you?
    • As a place of business that is used by your patients, clients, or customers in meeting or dealing with you in the normal course of business?
    • Exclusively and regularly by you to conduct administrative or management activities and there is no other fixed location of the business where you conduct substantial administrative or management activities of the business?

If you are an employee you also need to answer "yes" to this question.

  1. Is the workspace in the home used for the convenience of the employer, as opposed to your own convenience?

    Note: In most circumstances working at home is for the convenience of the employee if your employer also has a place for you in its office.

If you can honestly answer yes to all of the appropriate questions above you should qualify. But remember, you need to satisfy these criteria each year. Just because you qualified last year does not mean you automatically qualify this year.