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• There is some argument that claiming the Office in Home deductions makes you a target for an IRS audit. Opinions are mixed.
• The IRS has specific requirements that you must meet in order to claim these deductions. Make sure you meet the requirements to the letter.
• There are certain limitations on deductions and there are certain consequences of claiming some of the deductions, especially with regard to depreciation on your home should you decide to sell it later.

The best way to stay out of trouble is to only claim the Home Office deduction if you qualify, only to claim the expenses you are entitled to, and to properly document your expenses in case the IRS questions your eligibility or the amount of expenses you attempt to claim.

When in doubt, consult a qualified tax professional (best choice) or contact the IRS for clarification - just be sure to document you communications with the IRS.

What Deductions are at Stake if You Qualify

If you meet the IRS' requirements for claiming the Home Office deduction on your tax return, you may be able to deduct a percentage of:

• Your real estate property taxes on your home
• Mortgage interest (Be careful not to claim the interest twice - once on Schedule A for your Itemized Deductions and a second time here. I've even had tax software programs trip me on this.)
• Your rent payments if you are not a home owner
• Utilities
• Homeowners or Renter's insurance
• Depreciation on your home (if you own)
• Painting, and repairs. (Permanent improvements are added to the basis of your home for calculating depreciation and you can then recover these if you claim deprecation as part of your Home Office deduction.)

What is a Home for this Purpose?

The IRS defines a “home” as a house, condominium, apartment unit, or even a boat.

Who Qualifies for the Home Office Deduction?

Self-employed individuals who operate a home-business usually find it easy to qualify for the Home Office deductions. In some cases, telecommuters may also qualify to take some of the deductions.

There are two essential requirements you must meet in order to qualify for the deduction:

1. You must use that part of your home regularly and exclusively for business purposes.
2. The business part of your home must be either your principal place of business or the location where you meet with clients or customers in the normal course of conducting business. For detached garage or other separate structures, the requirement is only that the building is used in connections with your trade or business. You can also claim deductions if you use an area of your home for storage of inventory or product samples.

What is Regular and Exclusive Use?

The IRS gives several examples of regular and exclusive use. If your home is the only location of your business - except for perhaps a PO box or mailing service that you use as a mailing address - you can pretty much expect to qualify as long as you are operating a business and not a hobby. Many of us these days have virtual businesses - we don't generally see too many live customers "in the flesh" - so we would qualify. However, you still need to meet the exclusive use requirement - that the area of the home you are claiming is only used for your business - it doesn't even need to have partition walls - and not for any personal use whatsoever.

You must use a designated part of your home for business purposes on a continuous basis, not just occasionally for business. Thus, you can't use your office as a guest bedroom as well.

If you use a computer in your home office, you cannot use this computer to send personal e-mails as doing so would disqualify you from taking the home office deduction. You can use the area of your home for more than one business but you cannot mix business with personal use.

Exclusive Use Exceptions

The IRS provides that you do not have to meet the exclusive use requirement in either of these two cases:

• You operate a licensed day care center in your home.
• You store inventory or products for sale in your business.

In cases that meet these exceptions, personal use and business use may be mixed. With regard to inventory storage, you can only have mixed use of the area you use for storage if you do not have any other business location besides your home.

This primer only touches the surface of the home office deduction discussion. If you are self-employed or if you own a side business that generates a profit, talk to your accountant to see if this is one deduction you don't want to overlook.

About My Services

I believe in providing service to all my clients even after the mortgage closes. If you ever need assistance in dealing with any issues that you may run into, please let me know. Here are some of the ongoing services I can provide you:

• Evaluate any "low mortgage rate" offers you get in the mail or via email
• Assist you in obtaining a home equity loan or home equity line of credit should the need arise
• Help you properly manage the equity in your home to achieve the highest return
• Assist any friends, family or co-workers who may be in the market to buy a home or refinance their mortgage
• Review your credit report with you if you feel you may be a victim to identity theft
• Provide you with names of trusted financial planners or tax planners if you need this type of assistance
• Review your auto and homeowner's insurance to make sure you have the coverage you need and to make sure you are not paying more than you should
• Advise you when you may want to consider refinancing your mortgage based on prevailing interest rates, and your level of debt.

At Your Company Name, we offer mortgages for most buyers, including ones who are self-employed or who have damaged credit. We have lenders who offer 100% financing meaning no down payment for qualified buyers.

We also offer mortgages with start rates as low as 1%, making it easier to get a buyer into a home or use their equity to create an investment portfolio while having a minimal impact on cash flow.

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