I know that I qualify for the home-office deduction if I perform my administrative and management activities in my office space at home.
What happens if I do other work activities at home? For example, if I do some marketing there, do I ruin my deduction?
The law says that your home office must be your principal place of business. One way to meet this requirement is to perform substantially all your administrative and management activities in the home office.
However, the rules don’t prohibit you from doing other business activities in the home office. You can do your marketing work at home without creating any problems whatsoever!
Here are the two dangers to watch out for that could hurt you deduction:
- Doing too much administrative or management work outside your home office.
- Doing any personal or nonbusiness activities in your home office area
The Home-Office Deduction
You qualify for the home office deduction under the administrative and management activities safe harbor if you meet all four of the following requirements:
- You use the home office exclusively for the business for which you are seeking the deduction (i.e., no personal or other business disqualifying use of the space).
- You use the home office regularly for business (at least 10 hours a week).
- You perform administrative or management activities of your trade business at you home office.
- You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
Administrative and Management Activities
The IRS lists the following as examples of administrative and management activities.
- Billing customers, clients, or patients
- Keeping books and records
- Ordering supplies
- Setting up appointments
- Forwarding orders
- Writing reports
Can you do other work at the Home Office?
Absolutely. You can do as much work as you want from your home office. There is no limitation against doing other business in addition to your administrative and management work.
The first thing to watch out for is nonbusiness activities. You must use the home office exclusively for business, which means the law does not allow any personal use. If you want to know more about the exclusive use rule, take a look at the article Home-Office Deduction Requires Exclusive Use.
The second thing to watch out for is a second business or other activity that does not qualify for the home-office deduction. You need to use your office exclusively for the business or businesses that qualify for the deduction.
What to Avoid
You don’t want to do too many administrative or management activities outside of the office.
Fortunately, the law allows you to do the following:
- Conduct administrative or management activities when not in a fixed location (e.g., you’re in a car or hotel room).
- Occasionally conduct minimal administrative or management activities at locations other than your home. (e.g., at your second place of business).
- Hire a third-party business to conduct your administrative or management activities at locations other than you home. For example, this rules means that you can hire a company to do your billing from its place of business.
To get the home-office deduction, your home office must be your principal place of business. You achieve this when you conduct substantially all your management and administrative work there.
You can still do other types of work at home, such as marketing activities.
You ruin your home-office deduction when you have any of the following:
- Personal (nonbusiness) activities in your home office space
- Use of the home-office space for other businesses that don’t qualify for the home-office deduction
- Excessive management and administrative work at a fixed location other than the office in your home.