Definition: Employees who work out of their home or independent contractors who have a home office may be able to deduct part of their household expenses on their tax return. Employees who work at home may be able to deduct a percentage of rent or mortgage and utilities if they were not reimbursed for expenses by their employer. Business use of the home is an itemized deduction. Self-employed persons may be able to claim expenses for business use of their home on Schedule C. This expense reduces net profit, but may not reduce profit to less than zero. In other words, independent contractors may not use home office expenses to generate a loss for their business. Business use of the home is calculated on Form 8829 (PDF).
Also Known As: home office deduction, office in the home deduction.
