I have a home office. Can I deduct expenses like mortgage, utilities, etc., but not deduct depreciation so that when I sell this house, the basis won't be affected?

If you qualify to deduct expenses for the business use of your home, you can claim depreciation for the part of your home that is a home office. Generally, the part of your home that is a home office is depreciated over a recovery period of 39 years using the straight line method of depreciation and a mid-month convention. If you do not claim depreciation on that part of your home that is a home office, you are still required to reduce the basis of your home for the allowable depreciation of that part of your home that is a home office when reporting the sale of your home. For more information, refer to Publication 587, Business Use of Your Home.

References:

• Publication 946, How to Depreciate Property
• Publication 544, Sales and Other Dispositions of Assets
• Publication 587, Business Use of Your Home

I use my home for business. Can I deduct the expenses?

To deduct expenses related to the business use of part of your home, you must meet specific requirements. Even then, your deduction may be limited.

Your use of the business part of your home must be:

• Exclusive (see *exceptions below),
• Regular,
• For your trade or business, AND

The business part of your home must be one of the following:

• Your principal place of business,
• A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or
• A separate structure (not attached to your home) you use in connection with your trade or business.

Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction. You must meet the tests discussed above plus:

• Your business use must be for the convenience of your employer, and
• You do not rent any part of your home to your employer and use the rented portion to perform services as an employee.

Whether the business use of your home is for your employers convenience depends on all the facts and circumstances. However, business use is not considered to be for your employers convenience merely because it is appropriate and helpful.

*exceptions

You do not have to meet the exclusive use test if you satisfy the rules that apply in either of the following circumstances.

• You use part of your home for the storage of inventory or product samples.
• You use part of your home as a day-care facility.

Form 1040, Schedule C (PDF) filers calculate the business use of home expenses and limits on Form 8829 (PDF). The deduction is claimed on line 30 of Schedule C. Employees claim deduction for business use of home as an itemized deduction on Form 1040, Schedule A (PDF).

For more information refer to Tax Topic 509, Business Use of Home, or Publication 587, Business Use of Your Home (Including Use by Day-Care Providers).