J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

40.13 What Home Office Expenses Are Deductible?

For a qualifying home office (40.12), deductible costs may include real estate taxes, mortgage interest, operating expenses (such as home insurance premiums and utility costs), and depreciation allocated to the area used for business. The deduction figured on Form 8829 may not exceed the net income derived from the business (40.15).

The deduction from Form 8829 is entered on Line 30 of Schedule C.

Expenses that affect only the business part of your home, such as repairs or painting of the home office only, are entered on Form 8829 as “direct” expenses. Expenses for running the entire home, including mortgage interest, taxes, utilities, and insurance, are deductible as “indirect” expenses to the extent of your business-use percentage (40.14).

Household expenses and repairs that do not benefit the office space are not deductible. However, a pro rata share of the cost of painting the outside of a house or repairing a roof is deductible. Costs of lawn care and landscaping are not deductible.

If you install a security system for all your home’s windows and doors, the portion of your monthly maintenance fee that is allocable to the office area is a deductible operating expense. Furthermore, the business portion of your cost for the system is depreciable. Thus, if the office takes up 20% of your home (40.14) you may deduct, subject to an income limitation (40.15), 20% of the maintenance fee and a depreciation deduction for 20% of the cost. ...