Home Based Business Tax Breaks for 2011, 2012

You may be able to deduct certain expenses for the part of your home you use for business whether you are self-employed or are an employee.

Part of your home must be regularly and exclusively used for business to claim a deduction for a home based business.

Here are the guidelines:

• Your home must be the principal place of business for your trade or business
• Your home must be the place where you meet and take care of your clients, patients, or customers in the normal course of business or your trade
• If you use a separate structure that is not attached to your house it must be in connection with your business or trade

Home Based Business Exclusive Use Rule

There is something called the exclusive use of requirement rule. This means you cannot deduct a home based business tax break if you also use that part of your home for personal use. For example, if you use a spare bedroom as an office and conduct your business in there, you then cannot use the same bedroom as a guest room. If the spare room is used for any personal use you canʼt claim the space as a tax deduction.

Principal Place Of Business

There is a test called the principal-place-of-business test. You must determine that your home is the principal place of your business or trade. You must determine where your most important activities are performed and where most of your time is spent, in order to deduct expenses for the business use of your home.

Deductions also may be taken for the regular use of a residence if youʼre providing day care services or for business storage purposes; exclusive use is not required in these cases. If you rent out your residence you also may take deductions, see Publication 587.

Home Based Business Tax Breaks That Are Not Allowed

You may not deduct expenses for lawn care, new landscaping in general or for redecorating a room that is not used for business. Deductible expenses for a home based business use include the business portion of real estate taxes, deductible mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs.

To figure the amount you can deduct for the home based business tax break, you can use the entire amount of expenses attributable solely to the portion of the home used in your business. The percentage of your home used for business determines the amount you can deduct for expenses.

To calculate this percentage, divide the number of square feet used for business by the total square feet of your home. If the rooms are about the same size then, base it on how many rooms you have in total by how many are used solely for business. If youʼre a day care provider then, itʼs based on how many hours are used for business by how many hours are used for personal use.

If you have any other home business questions, TurboTax Online has a comprehensive web site that can give you the answers. If you run a business out of your home then, you do qualify for the home based business tax deductions. Donʼt miss out on the many deductions you qualify for.