The Internal Revenue Code gives self-employed taxpayers (sole proprietors, partners, and LLC members) four different ways to qualify for home office write-offs:
1. The taxpayer conducts most of his/her income-earning activities in the home office (i.e., the office is his/her principal place of business).
2. The taxpayer conducts his/her administrative and management activities in the home office. However to use this qualification rule, he/she cannot make substantial use of any other fixed location for such administrative and management chores.
3. The taxpayer uses his/her home office to meet with customers or clients.
4. The taxpayer's home office is detached from his/her residence, and the office space is used for any business-related purposes.
5. Under all four qualification rules, the taxpayer must use the office space regularly and exclusively for business purposes during the tax year. Regularly means often, as opposed to occasionally. Exclusively means no personal use at any time during the year. [See IRC Sec. 280A(c)(1).]
6. When the self-employed taxpayer operates his/her business as a sole proprietorship or as a single-member LLC (treated as a sole proprietorship for federal tax purposes), the home office deduction is initially claimed on Form 8829 (Expenses for Business Use of Your Home) and then transferred to Schedule C.
7. When the self-employed taxpayer is a partner or member of a multi-member LLC (treated as a partnership for federal tax purposes), the home office deduction is claimed on a separate line on Schedule E.
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