In fact, about one third of all U.S. homes have offices, according to Wirthlin Worldwide, a national opinion research and strategic consulting firm. These home office users are most likely married, middle-aged, educated and earning an income of $50,000 or more a year.

But not every business is suited to operate at home, experts say. Home offices are more acceptable for appointment-based businesses than for retail enterprises. For example, if a business is selling products, a store front off site would project a more professional option. 

Home office users can set up work areas in a spare bedroom, the third stall of a garage or a separate, unattached structure. If there’s no dedicated space available, an extra room could be added. And if the business doesn’t require face-to-face customer interaction, a make-shift office in any free corner will do until a more suitable arrangement can be made. 

No matter where their home office is set up, home-based workers get to enjoy the convenience and flexibility of operating from home. No long commutes. No office politics. Plus, they can generally work whenever they want, which can mean spending more quality time with their family.

Also, home-based workers can qualify for a variety of tax advantages, depending on the nature and extent of their business activity. Also, they may be eligible to deduct part of their utilities, home repair and maintenance, property tax and house insurance costs, based on the percentage of the residence they use for business purposes.

For example, a home-based worker using 100 square feet of a 1,000 square-foot-home for business could deduct 10 percent of the utilities, insurance, real estate taxes and a number of other indirect expenses.

Generally, to qualify for the deduction, the home must be the principal place for conducting business; the business must occupy a separate and identifiable space and use the space regularly and exclusively for business purposes. The deduction is also available to tax filers using a home office to complete business-related administrative or management activities. That is, as long as there is no other fixed location where those activities are conducted.

As a word of caution, home office deductions can be tricky and historically have drawn more attention from the IRS. To be on the safe side, home-based workers should consult with a tax advisor before taking the home office deduction.

Copyright, 2006, Kate Smalley
Connecticut Secretary
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