What you can and can’t deduct when you work from home.
Working from home can offer many advantages including tax deductions. Just take care what you try to write off for your home office on your return.
Passing the IRS Litmus test
To meet IRS guidelines, your home office must be your principal place of business or the place you see clients in the normal course of business. Parts of your home you use to store products or equipment for your business also count. That doesn’t mean that all your work has to be done from home. If you’re an outside salesperson, you probably spend most of your work time elsewhere. But if you do your billing and return customer calls primarily from your home, your home office should qualify.
Measuring your home office
The amount you can deduct for your home office depends on the percentage of your home used for business. Your work space doesn’t need to be a separate room, a table in a corner qualifies. But it has to be an area that’s used solely for business. The tax break also covers separate structures 
on your property, like a detached garage you’ve converted to an office. Unlike an office inside your home, a separate structure doesn’t have to be your mail place of business to qualify for a deduction. That’s because the IRS believes your family is less likely to use a separate structure as a part time play area or den.
What can you deduct?
Once you’ve figured out what percentage of your home you use for business, you can apply that percentage to different home expenses. These include:
Mortgage interest, Real estate taxes
Utilities, Home repairs and maintenance
Home owners insurance
Just take each expense and multiply it by your home office percentage (say 5%). That’s the amount you can deduct as a business expense. So if you spend $150 a month on electricity, you can deduct $7.50 as a business expense. That adds up to a $90 deduction per tax year.
Don’t forget depreciation
Depreciation is based on the idea that everything, even something like a home, wears out eventually. To figure home office depreciation, start by calculating the tax basis of your home, generally the purchase price plus the cost of improvements, minus the value of the land it sits on. Next, multiply the tax basis by the percentage of your home used for work. This gives you the tax basis for your home office.
This article provides general information about tax laws and consequences, but should’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice, tax laws may vary by jurisdiction.
references: houselogic, donna fuscaldo