Today, more than half (52 percent) of all small businesses operate from home. In addition, many employees are off site, working from their homes rather than their employers’ offices. The tax law allows eligible taxpayers to deduct home office expenses, essentially converting some nondeductible personal expenses into deductible business write-offs (Code Sec. 280A). For 2012 returns, only actual costs can be deducted by those who qualify for the home office deduction. Starting next year, eligible taxpayers can choose to deduct either their actual costs or an IRS-set safe harbor (essentially a standard deduction amount).
Eligibility for the Deduction
There are two tests for being eligible for a home office deduction. Both tests must be satisfied to claim the deduction.
