Qualifying for a Deduction — 2025 Publ 587 (PDF)

Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Even then, the deductible amount of these types of expenses may be limited. Use this section and Figure A to decide if you can deduct expenses for the business use of your home.

To qualify to deduct expenses for business use of your home, you must use part of your home:

Exclusively and regularly as your principal place of business (see Principal Place of Business , later);
Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business;
In the case of a separate structure that is not attached to your home, in connection with your trade or business;
On a regular basis for certain storage use (see Stor- age of inventory or product samples , later);
For rental use (see Pub. 527); or
As a daycare facility (see Daycare Facility, later).

Exclusive Use

To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition.

523

551

583

946

523 Selling Your Home

551 Basis of Assets

583 Starting a Business and Keeping Records

946 How To Depreciate Property

Form (and Instructions)

Schedule C (Form 1040) Schedule C (Form 1040) Profit or Loss From

Business

4562

8829

4562 Depreciation and Amortization

8829 Expenses for Business Use of Your Home

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You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes.

Example. You are an attorney and use a den in your home to write legal briefs and prepare clients’ tax returns. Your family also uses the den for recreation. The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den.

Exceptions to Exclusive Use

You do not have to meet the exclusive use test if either of the following applies.

You use the part of your home in question for the storage of inventory or product samples (discussed next).
You use the part of your home in question as a daycare facility (discussed later under Daycare Facility ).

Note: With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test.

Storage of inventory or product samples. If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. However, you must meet all the following tests.

You sell products at wholesale or retail as your trade or business.
You keep the inventory or product samples in your home for use in your trade or business.
Your home is the only fixed location of your trade or business.
You use the storage space on a regular basis.
The space you use is a separately identifiable space suitable for storage.

Example. Your home is the only fixed location of your business of selling mechanics’ tools at retail. You regularly use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business.

Regular Use

To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Incidental or occasional business use is not regular use. You must consider all facts and circumstances in determining whether your use is on a regular basis.

Trade or Business Use

To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. If you use your home for a profit-seeking activity that

is not a trade or business, you cannot take a deduction for its business use.

Example. You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. You do not make investments as a broker or dealer. So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home.

Principal Place of Business

You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. To determine whether your home is your principal place of business, you must consider:

The relative importance of the activities performed at each place where you conduct business, and
The amount of time spent at each place where you conduct business.

Your home office will qualify as your principal place of business if you meet the following requirements.

You use it exclusively and regularly for administrative or management activities of your trade or business.
You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. However, see the later discussions under Place To Meet Patients, Cli- ents, or Customers and Separate Structure for other ways to qualify to deduct home office expenses.

Administrative or management activities. There are many activities that are administrative or managerial in nature. The following are a few examples.

Billing customers, clients, or patients.
Keeping books and records.
Ordering supplies.
Setting up appointments.
Forwarding orders or writing reports.

Administrative or management activities performed at other locations. The following activities performed by you or others will not disqualify your home office from being your principal place of business.

You have others conduct your administrative or management activities at locations other than your home. (For example, another company does your billing from its place of business.)

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You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room.
You occasionally conduct minimal administrative or management activities at a fixed location outside your home.
You conduct substantial nonadministrative or nonmanagement business activities at a fixed location out

side your home. (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home.)

You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead.

Figure A. Can You Deduct Business Use of the Home Expenses? Do not use this chart if you use your home for the storage of

inventory or product samples, or to operate a daycare facility. See Exceptions to Exclusive Use, earlier, and Daycare Facility, later.

Example 1. Sid is a self-employed plumber. Most of Sid’s time is spent at customers’ homes and offices installing and repairing plumbing. Sid has a small office at home that is used exclusively and regularly for the administrative or management activities of the plumbing business, such as phoning customers, ordering supplies, and keeping the books.

Sid writes up estimates and records of work completed at the customers’ premises. Sid does not conduct any substantial administrative or management activities at any fixed location other than their home office. Sid does not do

direct billing. Sid uses a local bookkeeping service to bill customers.

Sid’s home office qualifies as a principal place of business for deducting expenses. Sid uses the home office for the administrative or managerial activities of the plumbing business and has no other fixed location where these administrative or managerial activities are conducted. Sid’s choice to have billing done by another company does not disqualify the home office from being their principal place of business. Sid meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home.

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Example 2. Alex is a self-employed sales representative for several different product lines. Alex has an in-home office that is used exclusively and regularly to set up appointments and write up orders and other reports for the products Alex sells. Alex occasionally writes up orders and sets up appointments from a hotel room while away on business overnight.

Alex’s business is selling products to customers at various locations throughout an assigned territory. To make these sales, Alex regularly visits customers to explain the available products and take orders.

Alex’s home office qualifies as a principal place of business for deducting expenses for its use. Alex conducts administrative or management activities there and has no other fixed location where substantial administrative or management activities are conducted. The fact that Alex conducts some administrative or management activities in a hotel room (not a fixed location) does not disqualify the home office from being a principal place of business. Alex meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home.

Example 3. Taylor is a self-employed anesthesiologist. Taylor spends the majority of the time administering anesthesia and postoperative care in three local hospitals. One of the hospitals provides a small shared office where Taylor could conduct administrative or management activities.

Taylor very rarely uses the office the hospital provides but instead uses a room at home that has been converted to an office. Taylor uses this room exclusively and regularly to conduct all the following activities.

Contacting patients, surgeons, and hospitals regarding scheduling.
Preparing for treatments and presentations.
Maintaining billing records and patient logs.
Satisfying continuing medical education requirements.
Reading medical journals and books.

Taylor’s home office qualifies as a principal place of business for deducting expenses for its use. Taylor conducts anesthesiologist-related administrative or management activities there and at no other fixed location where substantial administrative or management activities for this business are conducted. Taylor’s choice to use their home office instead of the one provided by their hospital does not disqualify the home office from being their principal place of business. Taylor’s performance of substantial nonadministrative or nonmanagement activities at fixed locations outside their home also does not disqualify the home office from being their principal place of business. Taylor meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home.

More Than One Trade or Business

The same home office can be the principal place of business for two or more separate business activities. Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. You must use the home office exclusively and regularly for one or more of the following purposes.

As the principal place of business for one or more of your trades or businesses.
As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses.
If your home office is a separate structure, in connection with one or more of your trades or businesses.

You can use your home office for more than one trade or business activity, but you cannot use it for any activities that are not related to a trade or business.

Place To Meet Patients, Clients, or Customers

If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests.

You physically meet with patients, clients, or customers on your premises.
Their use of your home is substantial and integral to the conduct of your business.

Doctors, dentists, attorneys, and other professionals who maintain offices in their homes will generally meet this requirement.

Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home.

The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business.

Example. Sam, a self-employed attorney, works 3 days a week in a rented office, then works 2 days a week at home, in a home office used only for business. Sam regularly meets clients there. The home office qualifies for a business deduction because Sam meets clients there in the normal course of their business.

Separate Structure

You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of

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business or a place where you meet patients, clients, or customers.

Example. Bobbie operates a floral shop in town. Bobbie grows the plants for the shop in a greenhouse located at home. Bobbie uses the greenhouse exclusively and regularly for the floral shop business, so Bobbie can deduct the expenses for its use (subject to certain limitations, described later).