Publication 587 (2023): Business Use of Your Home
Publication 587, titled "Business Use of Your Home (Including Use by Daycare Providers)," is an official Internal Revenue Service (IRS) resource that provides guidance on claiming the deduction for using a portion of your home for business purposes.
Key Points to Remember About Publication 587
Who can use it: This publication is relevant to individuals who operate a business from their residence and file Schedule C (Form 1040) to report their business income and expenses.
Purpose: It explains how to calculate and claim the deduction for the business portion of expenses like:
- Real estate taxes
- Mortgage interest (or rent)
- Utilities
- Insurance
- Depreciation
- Maintenance and repairs
Qualifying for the Deduction:
To claim the deduction, your home office must meet two key tests:
A. Regular and exclusive use: The space must be used regularly and exclusively for business purposes. This means it's not used for personal activities and is dedicated solely to business needs.
B. Principal place of business or meeting place:
- The space can be your principal place of business if it is the primary location for your business activities. OR
- It can be used to meet with patients, clients, or customers on a regular basis, even if you have another primary business location. However, their use of the space must be substantial and integral to your business operations.
Additional Considerations:
Simplified method: If the business use of your home is less than 10% of the total area and doesn't exceed $1,500, you can use the simplified method for claiming the deduction. This method utilizes a standard deduction amount based on the square footage used for business.
Recordkeeping: It's crucial to maintain detailed records to support your claim, including the percentage of your home used for business and the associated expenses.
For the current year's Publication 587, click here.