J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Special Business Uses of a Home

There are 2 exceptions to the exclusive use requirement: day-care facilities and storage space. If either of these exceptions apply, you can deduct your home office expenses even though the space is also used for personal purposes.

Day-Care Facilities

If you use all or part of your home on a regular basis as a facility to provide day-care services, you may claim home office deductions if you meet certain tests.

• You must provide day care for children, elderly persons (age 65 and older), or persons who are physically or mentally unable to care for themselves.
• You must have a license, certificate, registration, or other approval as a day-care center or family or group day-care home under your state law. You can claim home office expenses if you have applied for approval and are awaiting it. You cannot claim home office expenses if your application has been rejected or your approval revoked.

Note: Special rules for meal costs of day-care providers are covered in Chapter 22.

CALCULATING YOUR HOME OFFICE DEDUCTION

If you use a portion of your home exclusively for day-care services (e.g., a basement playroom), you can deduct your expenses for any other type of business use of a home. If, however, you use a portion of your home for day-care services but also use it for personal purposes (e.g., your living room), you must follow special allocation rules to determine your home office deduction. You must compare the business use of the space with the total ...