Home Office Expenses

Expenses directly allocated to the home office such as painting the office or buying furniture for the office are 100% deductible. Other expenses indirectly incurred are deductible at a business expense allocation percentage. These would include Real estate taxes, mortgage interest, depreciation, utilities, rent, insurance, snow removal and security.

IRS publication 587 explains the details of deducting a home office.

To deduct home office expenses you must prove that you use the home area "exclusively" and on a "regular" basis as a place of business to meet or deal with clients, patients or customers in the normal course of your business or if you spend most of your working time there and most of your business income is attributable to your activities there. Also it must be a separate structure with no personal use. Exclusive use means solely for business so spare bedrooms or use of a den have been challenged by the IRS.

If your home office is your principal place of business, you can deduct travel costs between the home office and the offices of your customers or clients.

Taxpayers are entitled to deduct any expenses for using their homes for business purposes if the expenses are attributable to a portion of the home or separate structure used Exclusively and On A Regular Basis as the principal place of any business carried on by the taxpayer (occasional use is not sufficient) or a place of business that is used by clients, customers, patients, in meeting or dealing with the taxpayer in the normal course of business. If the taxpayer is an employee, the business use of the home must also be for the convenience of the employer. A home office deduction may be claimed if the taxpayer regularly and exclusively uses part of the home for conducting the administrative or management activities of the business. Home office expenses may include real estate taxes, mortgage interest and operating expenses such as insurance and utilities and also depreciation. Home office deductions may be limited. The allowed deduction is calculated and reported on IRS Form 8829 and then transferred to the taxpayers Schedule C. There are certain tax consequences of claiming a office in the home deduction. A consequence occurs when the taxpayer sells his residence. Current law allows a $500,000 exclusion on the sale of a residence ($250,000 for non joint returns). If a residence is sold with a home office, the gross sales price must be apportioned over the residence and the business office. A taxable gain on the sale may occur. If a residence is sold without a home office the full exclusion may be taken. Some CPA's suggest not claiming a office in your home for the two years prior to the sale of the residence. Speak to your local CPA about your specific circumstances to work out a strategy that works for you.

Yes. If you meet the exclusive and regular use criteria, ownership of a cooperative apartment will qualify for a home office deduction. You may deduct depreciation based on your stock interest in the cooperative. Speak to your local CPA about your home office deductibility.

No. Unless this investing is your primary business, it cannot be claimed as a home office deduction.