The other day I wrote a bit about the home office tax deduction, and today I thought I’d expand on it a bit by talking about ‘regular and exclusive’ usage, as well as how you can substantiate your claim to the IRS…
What constitutes regular and exclusive usage?
Regular use. The IRS doesn’t offer a clear definition of regular use — only that you must use a part of your home for business on a continuing basis, not just for occasional or incidental business. You can probably meet this test by working a couple of days a week from home, or a few hours each day.
Exclusive use. Exclusive use means that you use a portion of your home only for business. If you use a room of your home for your business and also for personal purposes, you don’t meet the exclusive use test. However, you can set aside a portion of a larger room to be used only for business, as long as your personal activities don’t stray into it.
How do I substantiate my claim?
Be ready to prove to the IRS that you are entitled to take the home office deduction. Here are some steps you can take to help establish your legal right to deduct home office expenses:
— Photograph your home office and draw a diagram showing the location of the office in your home. Keep this information in your tax folder.
— Have your business mail sent to your home.
— Use your home address on your business cards and stationery and in all business ads.
— Get a separate phone line for the business.
— Have clients or customers visit your home office and keep a log of those visits.
— Keep track of the time you spend working at home.