To deduct expenses related to the business use of part of your home, you must meet specific requirements. Even then, your deduction may be limited.

To qualify to claim expenses for business use of your home, you must meet both the following tests.

1. Your use of the business part of your home must be:

a. Exclusive (however, see Exceptions to exclusive use, later),

b. Regular,

c. For your trade or business, AND

2. The business part of your home must be one of the following:

a. Your principal place of business (defined later),

b. A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or

c. A separate structure (not attached to your home) you use in connection with your trade or business.

Exclusive use. To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition.

You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes.

Exceptions to exclusive use. You do not have to meet the exclusive use test if either of the following applies.

1. You use part of your home for the storage of inventory or product samples.

2. You use part of your home as a daycare facility.

For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers).

Principal place of business. Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements.

· You use it exclusively and regularly for administrative or management activities of your trade or business.

· You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors.

· The relative importance of the activities performed at each location.

· If the relative importance factor does not determine your principal place of business, the time spent at each location.

If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. However, for other ways to qualify to deduct home office expenses, see Publication 587.

Which form do I file? If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587.

More information. For more information about business use of your home, see Publication 587.