Demystifying the Home Office Deduction / Rumors abound about who can claim it, how it's calculated and whether taking it will result in an IRS audit.

Molly McClusky for US News World Report writes: t's the sexiest and scariest of deductions, and it's often shrouded in mystery. It's the home office deduction, and rumors abound about who qualifies, how it's calculated and whether taking it automatically flags an IRS audit.

Unlike more obvious deductions, many people aren't sure if they qualify to take the home office deduction. But with the large number of American small businesses based out of an owner's home – including more than half of all small businesses, according to the Small Business Administration – those who qualify shouldn't hesitate to claim the home office deduction.

According to the IRS, a portion of your house might be considered a legitimate home office if it meets a few requirements: It's your primary workplace (i.e., you don't have a separate office space that you are required to attend from 9 to 5 every day); it's used exclusively for work; you regularly meet with clients there; and/or you have a place such as a garage that you use to store work-related supplies.

Jeff Porter, certified public accountant and principle of Porter & Associates in West Virginia, says some people simply shouldn't take the deduction. "If you're someone who has an office that you go to every day, and maybe you bring work or files home, or you check emails after hours, this isn't really a home office," Porter says. "The exception would be if, for instance, you work at your regular office four days a week, and on Fridays you work from home, and have client meetings there. Then it would count."

Doing the Math

As with anything concerning the IRS, the home office deduction has some nuances, and they're outlined in Publication 587.  

There are two types of expenses that go into calculating the home office deduction: prorated and dedicated. Prorated expenses are ones for your overall home where a portion is claimed, such as a mortgage or rent, utilities and Internet. Dedicated expenses include items bought exclusively for the home office, such as furniture or new paint.  SNIP

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