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Janice France-Pettit: Claiming your home office on taxes

Union Bank

Posted: November 12, 2010 9:44 p.m.
Updated: November 13, 2010 4:55 a.m.

More Americans are increasingly working from home as a result of technological advances, changes in the job market and employer flexibility.  According to the latest statistics available from the U.S. Census Bureau, nearly 5.9 million people worked from home in 2008, and the trend is continuing.

People who are using space in their home for a business or office and expecting tax advantages may be surprised by the strict Internal Revenue Service and State of California Franchise Tax Board rules for claiming deductions.

Eligibility rules
In order to qualify for tax savings on a home office, a homeowner must use part of the home exclusively and regularly:

- as a principal place of business,

- as a place to meet or deal with patients, clients or customers,
- or in any connection with the trade or business where the business portion of the home is a separate structure.

Part-time usage
Incidental or occasional use of the home for business does not qualify for home-office deductions.  However, for certain storage, rental or daycare facility use, the homeowner is only required to use the property “regularly” not “exclusively.” 

Employee rules
Different rules apply to employees than to the self-employed.  For example, the regular and exclusive business use of a home office by an employee must be for “the convenience” of the employer.

The homeowner must keep detailed records related to the home office, including receipts, cancelled checks and other evidence of expenses.

Allowable deductions
The allowable deduction amount depends on the percentage of square footage used for business.  According to the IRS, other business expenses eligible for deductions include business phone, supplies, equipment depreciation, maintenance and repair, as well as a percentage of the homeowners’ insurance and utilities.  However, restrictions apply based on your gross income.

Selling the property
Homeowners claiming depreciation related to a home office need to realize that if there is a profit when selling the property, they may need to treat all or part of that gain as ordinary income.

For more information on home-office tax deductions, homeowners may review IRS Publication 587, Business Use of Your Home, at, or telephone (800) 829-3676. Because the rules applying to home-office deductions are detailed, people who work from home are encouraged to consult a certified public accountant, tax preparer or the IRS.  

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, Santa Clarita Valley, San Fernando Valley and Antelope Valley region. Visit for more information. The foregoing article is intended to provide general information about financing choices for home improvements and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor. Ms. France-Pettit’s column represents her own views, and not necessarily those of The Signal. Visit for more information.


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