Income tax has made more liars out of the American people than golf - Will Rogers

Home office deductions

If you have a home office, the business part of your home must be used exclusively and regularly for business. The business part of your home must be the principal place of business and used to meet or deal with clients or customers in the normal course of business. Day care and elder care are the exceptions to the rule.

The area of the home used for a business, is divided by the total area with the resulting percentage applied to indirect expenses. These expenses can be calculated in the business cost of the home which may include casualty losses, security system, mortgage interest, real estate taxes, insurance, repairs and maintenance, utilities and other operating expenses.

Have you started a business that may not turn a profit for several years?

Does your home business consistently lose money?

With a hobby losses are deductible ONLY to extent of gain, and deductibility is subject to 2% of AGI floor.

With a business, losses are generally deductible, losses beyond income may be carried over, and Social Security taxes must be paid.

Consult your tax advisor.