Employee home business deduction

The tax laws for employee home business deduction are a little different from other home business tax deduction. This section of the home based business and home business website deals with the situation where an employee uses his or her home for a business that he or she serves as an employee and not as a home business owner.

The convenience of the employer test

In order for an employee who work for an employer out of his or her own home to be able to deduct home business tax deductions, the employee must be able to satisfy the convenience of the employer test. If the  employee uses his or her home for home based business, the employee can deduct home office expenses if he or she uses it for the convenience of the employer. However, the convenience of the employer test is not clear cut. IRS tax laws do not provide exactly how to satisfy this tax rule.

In order to satisfy the convenience of the employer test, there must be a real need on the part of the employer for the employee to use his or her home as a home office. For example, if the employer provides an office for the employee, there is really  no need for the employee to work at home. Sometimes, the employer does not mind an employee working at home using computer at home. However, this does not allow the employee to deduct taxes. The convenience of the employee to work at home does not qualify for the convenience of the employer test.

Proof of convenience of the employer

An employee can get a letter from his or her employer stating that the home office use is for the employer 's convenience. However, this may not be enough to satisfy the IRS if the tax return is questioned. However, if the employer has no office space for the employee to use so that telecommuting is the only arrangement feasible, then clearly such arrangement is for the convenience of the employer. Of course, there may be situations where it is not clear whether the arrangement if for the convenience of the employer. Then, factors such as office space, arrangements with other workers, and other factors must be considered.

Renting home office for home business

A tax payer cannot claim a home office tax deduction if the tax payer rents a portion of his or her home to his or her employer and then perform services in his or her home as an employee. If the tax payer rents space to his or her employer, the rent is taxable to the tax payer.