Home Office

DEFINITION of 'Home Office'

An office located inside the taxpayer's home that serves as the taxpayer's principal place of business. In order for home office-related expenses such as utilities and mortgage payments to be deductible, the taxpayer must use it as his or her primary place of business. This means that either the majority of the work for the business must be performed there, or clients must be met there on a regular basis.

"Home office" can also refer to the administrative headquarters of a large enterprise, such as the home office of a large corporation that is located in a particular city.

BREAKING DOWN 'Home Office'

Taxpayers who use home offices can deduct a proportionate amount of the rent, mortgage, utilities, property taxes and other related expenses that they incur by dividing the square footage of their home office space by the total amount of square footage in their residence. This fraction is then applied to all related expenses to arrive at the dollar amount of deductible expenses.

RELATED TERMS
  1. Physical-Presence Test

    Similar to the bona fide foreign residence test, the physical-presence ...
  2. Principal Place Of Business

    The primary location where a taxpayer's business is performed. ...
  3. Home Office Expense

    Expenses incurred from the operation of a business or the performance ...
  4. Self-Employed Person

    An independent contractor or sole proprietor who reports income ...
  5. Main Home

    A term used by the Internal Revenue Service (IRS) to define the ...
  6. Entrepreneur

    An individual who, rather than working as an employee, runs a ...
Related Articles
  1. Taxes

    How To Qualify For The Home-Office Tax Deduction

    Homebodies can save big on their tax bill. Learn how to get in on the action.
  2. Entrepreneurship

    Top 10 Home Business Tax Tips

    If you work for yourself, make sure you are getting the most for your tax dollars.
  3. Brokers

    Top Tax Deductions For Brokers

    If you are paying out of pocket, you can make your business expenses work for you at tax time.
  4. Retirement

    Avoid An Audit: 6 "Red Flags" You Should Know

    Don't make yourself a target - steer clear of these attention-grabbing tax-filing practices.
  5. Entrepreneurship

    Creating A Home Business Work Space

    Your work environment can make or break your career as an entrepreneur.
  6. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  7. Credit & Loans

    What is an Alt-A Mortgage?

    Called "liar loans" for their low documentation requirements, Alt-A mortgages were hot until the subprime crisis. Now Wall Street wants to bring them back.
  8. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  9. Credit & Loans

    New Rules May Make It Easier to Get a Mortgage

    Fannie Mae and Freddie Mac have come to terms with lenders on how to solve mortgage disputes. This could be good news for people with lower credit ratings.
  10. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
RELATED FAQS
  1. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  2. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  3. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  4. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  5. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  6. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center