Home Office Allocation if Not Exclusive?

There was a content creator on Twitter the other week saying her tax preparer told her that she doesn’t need an exclusive space for her business to write-off a home office. If she uses 100% of her house 50% of the time for business, she will get a 50% write-off.

 Other tax preparers pointed out that wasn’t the case, but she responded with an exclusive-use carve out for storage of inventory and products. Obviously as a content creator, this did not apply to her situation still.

 IRS Publication 587 States:

Storage of inventory or product samples.

If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. However, you must meet all the following tests.

• You sell products at wholesale or retail as your trade or business.

• You keep the inventory or product samples in your home for use in your trade or business.

• Your home is the only fixed location of your trade or business.

• You use the storage space on a regular basis.

• The space you use is a separately identifiable space suitable for storage.

Example.

Your home is the only fixed location of your business of selling mechanics' tools at retail. You regularly use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business.

So - if you meet those tests, you can by-pass the exclusive test portion of writing-off your home office.

Source: Mad Woman Media