IRS Offers Simplified Safe Harbor Home Office Deduction

With the news that Weil, Gotshal & Manges has laid off 10 percent of its associates, and perhaps other firms will follow that lead, many attorneys might find themselves advising clients and consulting as self-employeds from their homes. Starting your own business, whether voluntarily or not, is exciting, exhilarating and, at times, frustrating. Take heart, though, as both self-employed individuals, and employees, can get tax benefits for working at home. And, in addition, the IRS has recently issued a safe harbor method for calculating the home office deduction, which might simplify things for some individuals, but there are limitations to its use.

The basic home office deduction principle is that to deduct home office expenses, a taxpayer must have a portion of his home that is exclusively used on a regular basis¹ as a principal place of business;² a place to meet or deal with clients and customers in the normal course of business;³ a storage area;⁴ a rental unit;⁵ or, a day care facility.⁶ In the case of a separate structure which is not attached to the individual's home, the structure must be used in connection with the individual's trade or business.⁷