- Exclusively and regularly as your principal place of business
- Place where you meet clients or customers
- In connection with your business, a separate structure which is not attached to your home
In addition to the above if you are an employee, in order to claim the home office deduction, the business use of your home must be for the convenience of your employer and not just appropriate and helpful to your employer. Generally this means your employer does not provide you with a place to work.
If you regularly report to work and are assigned a work station that is your workplace. Routinely required to work off-hours or availability for disaster recovery purposes does not make you eligible for the home office deduction.
The portion of the home used for business is the square footage of the home office divided by the total square footage of the house. If all of the rooms in the house are approximately the same size, you can base the percentage on the number of rooms.
This business percentage can be applied to indirect expenses such as home mortgage interest, rent, insurance, furnace and roof repairs, property taxes, depreciation, and utilities. Direct expenses that relate specifically to the home office such as painting the room can be fully deductible.
For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
Use Form 8829 - Instructions - to determine the deduction which is entered on line 30 of Schedule C. For more information, review IRS Publication 587.