Get the Breaks You Deserve

published 31 July 2007

To take a home-office tax deduction, you need to pass two tests: You must use the space for work on an exclusive and regular basis, and your home office must be your primary place for conducting business or meeting with clients. There's another condition if you're an employee of a company: Working at home must be for the convenience of your employer -- for example, if your company doesn't have a physical office. No dice if you have a boss who lets you telecommute.

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Row 0 - Cell 0	The Well-Equipped Home Office
Row 1 - Cell 0	Tax Matters When Working at Home
Row 2 - Cell 0	Retirement Plans for the Self Employed

Then there's the question of which deductions are fair game. Bryan Rhodes, a CPA in Arlington, Tex., breaks the list into two types of expenses. Indirect costs -- such as mortgage interest, property taxes, homeowners insurance, and general maintenance and repairs -- are generally deducted proportionately by square footage. So if you have a 150-square-foot office in your 1,500-square-foot home, you can deduct 10% of the indirect costs. Direct costs -- such as furniture, equipment, supplies and postage -- are fully deductible (for more on the home-office deduction, see IRS Publication 587, Business Use of Your Home).