10 IRS Rules for the Home Office Deduction

Direct and Indirect
Heating your office space is an indirect expense. KatarzynaBialasiewicz/iStockphoto/ThinkStock

As we pointed out on the last page, there are different kinds of expenses that you can take if you're claiming the actual expenses method of your home deduction. We'll see on the next page that this is one of the reasons the IRS introduced another method of claiming the home deduction: It can be a little tricky to figure out what and how much to write off using the actual expenses method.

Direct expenses are the ones that will allow for a full write-off. The catch is that they have to be wholly related to business costs. So if you're buying a copy machine for your home office (and it's solely for your business), you can write off the cost. Even repairs to the home office can be fully deducted.

Indirect expenses are probably the ones you'd really like to write off, though. That's stuff like the cost of the Internet, utilities, insurance and the like. Unless you're absolutely only using the Internet for work (please), you'll have to prorate it -- along with other indirect expenses -- based on the percentage you use for work. So you can write off your heating bill, but only up to the percentage you use it when you're conducting business. The rest is keeping your house comfortable in general, and the IRS isn't calling that an office expense.