Should You Take a Home Office Deduction?

New for the 2013 filing year: laws have been changed and there is now (finally) a much simpler way to calculate your deduction, as long as you still meet the requirements. Ask your professional tax preparer for details.


Another tax filing season has begun and along with it the usual advice from tax experts, financial publications, and pundits of many varieties. I am sooooo tired of hearing and reading the conventional “wisdom” offered to home-based business owners advising them to avoid the deduction for business use of their home.

Today’s culprit was the Independent Street blog from the Wall Street Journal digital network.

The usual reason given for this advice is that taking the home office deduction raises a red flag and increases the chance of an audit. To which I say, baloney! There is no evidence that this is true.

Statistics from the 2007 filing season show that for individual taxpayers (this is the category that includes people with home-based businesses who file Schedule C) audits are up 7 % overall to 1,384,563. That’s out of 134,421,400 returns filed for a rate of only 1.03%.

The greatest chances for audit (9.25%) were taxpayers with incomes over $1,000,000. Returns with incomes over 200,000 were audited at the rate of 2.87% and incomes over 100,000 at 1.77%. So if you want to reduce your chances for an audit, don’t make a million bucks!

I wholeheartedly believe that you should take all the tax deductions that you qualify for. And that’s the key. You must understand the regulations and must absolutely have the necessary documentation to prove your deductions.

If you do, there’s no reason to fear an audit.


4 comments to Should You Take a Home Office Deduction?

  • As a tax professional, I wanted to let you know. Well said. You are exactly right. Take all the deductions you are entitled to.

  • Sheryl is correct. I agree that a home business owner should not be afraid to take the home office deduction, but there are many things to consider and you must be prepared. To get a picture of what needs to be done, look at my U.S. Business Law and Taxes Guidesite on (

  • admin

    @Bruce Thanks for your support. Unfortunately, many CPAs, EAs, and other tax preparers don’t fully understand this deduction and how valuable it can be for home based biz owners.

    Too many entrepreneurs get wimpy tax advice.

    My posture is that if you qualify and have the necessary documentation for this deduction, you should go for it!

    Hope you have a great filing season this year.


  • admin

    @Jean Thanks for your comment. Yes, there are lots of considerations and home biz owners need to study the available material to make sure they understand the rules.

    Your site is a great place to start. There’s also an article with a deduction estimator here on my blog on the Articles page.

    By the way, I’ve been a big fan of the human-powered guides for many years. I still have one of their T-shirts from a promo they did early on…the one that asks “Is anybody out there?”


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