What is a legitimate home office expense, and what can you deduct? The IRS had previously limited the definition of what constituted a home office, therefore affecting which expenses were tax-deductible.
The Taxpayer Relief Act of 1997 eased the rules somewhat for deductible home office expenses. Beginning in 1999, home offices need only be used to administer a business in order to qualify as tax-deductible. A home office must no longer be the sole place for meeting customers or working.
However, the home office must still be used exclusively and regularly for business purposes to qualify as a deduction. Remember that if you take a deduction for depreciation on that part of your house used as an office, you must adjust your home's basis when you sell it.
For more information, see IRS Publication 587 : Business Use of Your Home (Including Use by Day-Care Providers).
