Home Office Deduction Question

[Tim Porsche]

Hi all, I'm thinking about trying to take the home office deduction next year for tax returns, but am not sure if I would qualify. Can anyone tell me, is there a minimum amount of hours you need to use a room for business activities before you are allowed to take the deduction? If I spend on average 5 hours per week in the room doing business related tasks, and use the room exclusively for that and nothing else, would I qualify for the deduction? I would be using this room for doing tasks on the computer related to running a small online business I have and managing rentals. Any advice would be greatly appreciated. I really don't feel like getting audited :D... Thanks

[Meagan Barkley]

There is no minimum hour requirement for the home office deduction. The main catch that trips people is that the space should be used EXCLUSIVELY for business. I have seen a court case where a taxpayer was denied the deduction because a bookcase filled with pleasure reading books was in the room.

Another glitch with rental property is whether it qualifies as a "business" since it is per se passive. I have seen courts side on both sides. There was a case where a gentleman with a W-2 job had a couple of rentals and he used his home office to collect rents and do bookkeeping and the court allowed it. I have also seen quite a bit of literature that if an activity is entered into for the production of income, it is considered a business for purposes of the home office, so one rental property should qualify.

The home office deduction is an easy audit flag since most people use the room for something else besides an office. Just depends on your risk tolerance and what you can prove to an auditor.

Also, there is a newer safe harbor for the home office deduction so you don't have to keep track of individual expenses. It is $5 per sq. foot.