To determine the percentage to use for the office in the home, you must first calculate the entire square footage of the house. If you have a finished basement, you must include that square footage in the total square footage. You then must determine the square footage that is used regularly and exclusively for your business. If you store product or samples, you may include that storage square footage as business use even if you store other items in the storage area. You then make a percentage calculation of the business use over the total square footage and that percentage is used for all expenses of the house.

If there are certain expenses that apply only to the business area, then you can deduct 100% of those expenses. Such expenses might be a kerosene space heater for the business area and the kerosene would be 100% deductible or painting the room or putting new flooring in the room would be 100% deductible because it applies only to the business portion.

 
This information is provided in an effort to help you gather and organize the information necessary to file your individual or small business income tax return. While these financial tools are not a substitute for financial advice from a qualified professional, they can be used as a starting point in your decision making process.