Tax Edge

With technology making it easier than ever for people to operate a business out of their home, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year. The IRS has just issued some Summertime Tax Tips that you may find helpful in determining whether you want to operate a small business from an office in your home.

Here are five important points the IRS wants you to know about claiming the home office deduction.

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly as your principal place of business or as a place to meet with patients, clients or customers in the normal course of your business. In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business. For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

2. Generally, the amount you can deduct depends on the percentage of your home that you use for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples. You should become familiar with those rules if you intend to carry on such activity.

4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to report the detailed expenses when you calculate your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.

5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available on the IRS website or by calling 800-TAX-FORM (800-829-3676).

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