Home office expenses are probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared it raised an automatic audit flag. But Congress has relaxed the rules, so now home offices attract far less attention. Your home office qualifies as your principal place of business if...
1) you use it "exclusively and regularly for administrative or management activities of your trade or business"; and 2) "you have no other fixed location where you conduct substantial administrative or management activities of your trade or business." This is true even if you have another office, so long as you don't use it more than occasionally for administrative or management activities. Claiming a home office lets you deduct the "business use percentage" of your mortgage interest or rent, property taxes, utilities, repairs, insurance, garbage pickup, and security. You'll get to depreciate part of your purchase price. And claiming a home office even boosts your car and truck deductions. That's because it eliminates nondeductible commuting miles for that business. We'll help you determine if you qualify for the home office deduction - and if so, how to make the most of it.
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