Real estate tip: Self-employed get deductions

Yes. Ever since Congress passed the Taxpayer Relief Act of 1997, a home can be considered a principal place of business if the taxpayer uses it to conduct administrative or management activities of a trade or business, and that there is no other fixed location where such activities take place.

In the past, the home-office deduction could only be claimed by taxpayers who could show that their house was their "principal place of business"–a requirement that was difficult for many people to meet. As before, deductions will be allowed for a home office that meets the above two-part test only if the taxpayer uses the office exclusively and regularly as a place of business. For example, a home-office deduction can be taken for a den that is used only for office purposes but cannot be taken if the den doubles as a spare bedroom. An additional rule covers taxpayers who work for an employer: The deduction cannot be taken unless the room is used for the convenience of the employer.

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