J. William Seabrooke CPA P.C.

The real (actual) unemployment rate is as high as 15% in some areas of the United States.  Job opportunities are limited.  Many former employees have decided to start their own businesses rather than become an employee again.  They often operate their business from their home.  Anecdotally, Hewlett Packard began its operations in the founder’s garage.  If qualified, making a decision regarding whether to claim the expenses for the use of your home for your business operations is a continuing issue and problem for both American taxpayers and the Internal Revenue Service.  As you may have already concluded, there are far too many instances of fraud and abuse by those taxpayers who are clearly not entitled to the deduction.  It is also a potential “red flag” area that could cause your tax return to be examined and audited.   

There are several situations that may exist in one of three categories:  1)  Fully qualified (entitled), 2) Partially qualified (not meeting one or more of the requirements, and 3)  Not  qualified.  Then the major considerations (factors) become whether or not you are claiming the expenses on your tax return.   From a practitioner’s perspective we must ask our clients about their specific situation and assist the client in determining whether or not the deduction (expenses) should be claimed.  While the Internal Revenue Service does provide general guidelines (which are also provided in this article) these guidelines can not be expected to cover every possible situation.  IRS Publication 587 (“Business Use of Your Home”)  provides additional information and guidance and should also be carefully reviewed.

IRS Topc 509 (Business Use of The Home) is provided on the “Information Center” page of this website.  To review the information in this article now on the business use of the home, click on this link.

Recent guidance from the Internal Revenue Service is provided below from IRS Tax Tip 2010-53: