IRS Publication 587, Exclusive Use

To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition.

You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes.

Example.
You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Your family also uses the den for recreation. The den is not used exclusively in your profession, so you cannot claim a business deduction for its use.

Exceptions to Exclusive Use

You do not have to meet the exclusive use test if either of the following applies.

  • You use part of your home for the storage of inventory or product samples.

  • You use part of your home as a Daycare Facility.

Storage of inventory or product samples.
If you use part of your home for storage of inventory or product samples, you can claim expenses for the business use of your home without meeting the exclusive use test. However, you must meet all the following tests.

  • You sell products at wholesale or retail as your trade or business.

  • You keep the inventory or product samples in your home for use in your trade or business.

  • Your home is the only fixed location of your trade or business.

  • You use the storage space on a regular basis.

  • The space you use is an identifiably separate space suitable for storage.

Example.
Your home is the only fixed location of your business of selling mechanics' tools at retail. You regularly use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business.

 

Qualifying for a Deduction

Exclusive Use
Regular Use
Trade or Business Use
Principal Place of Business
Place To Meet Patients, Clients, or Customers
Separate Structure

 

Information courtesy of the Internal Revenue Service.