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MOUNTAIN VIEW, Calif., Mar. 5, 2003 – A person's home is not just their castle, it's often their office and business as well these days. In recent years, millions of people have changed how they work, or more accurately, changed WHERE they work. The appeal of entrepreneurship, as well as the growth of telecommuting, has resulted in many people setting up home offices in their spare bedrooms, garages and dens.

The first question many people ask after deciding to use a home office is: "Can I take an income tax deduction on my home office?"

The answer is: "It depends." The legal Web site FindLaw (www.findlaw.com) says the Internal Revenue Service uses four tests that must be met to qualify for the home office deduction:

Exclusive Use
This applies to both the physical space and how it is used. The office does not have to be a separate room but does need to be separately identifiable. Make sure the space is not used for any non-business purposes, like serving as a part-time guestroom or a place for the kids to play computer games and check e-mail.

Regular Use
You must use the home office on a continuing basis, not just occasionally. There are some exceptions for seasonal industries, such as construction, as long as the office is still set aside and not used for any other purpose.

Place of Business
The home office must be either your principal place of business or the place you regularly meet with customers. What the IRS means by "principal place of business" is not always clear-cut. If you conduct the most important activities for the business in your home office and spend most of your time there, you may qualify for the deduction. The same applies if you use the home office for administrative or management activities and you have no other fixed location where you conduct these activities on a substantial basis. This allows someone who performs the essential tasks of his or her business outside of the home office, such as an electrician, plumber or outside salesperson, to qualify a home office as a principal place of business. If you regularly meet or deal with customers in your home, you can deduct your expenses for the home office even if you have another office. Occasional meetings and telephone calls do not meet this test.

Separate Structure
If you have a separate structure that is used exclusively and regularly for your business, such as a house painter's storage shed, expenses related to the structure, such as utilities, repair and depreciation, may be deductible. The expenses may be deductible even if you do not have a home office.

Special Rules for Telecommuters
People who work out of a home office while working as employees of a company have to pass two additional tests: First, the business use of your home must be for the convenience of the employer. Second, you cannot rent all or any portion of your home to your employer and claim a deduction for that portion.

Consult With a Tax Professional
Because the IRS rules and definitions are not always crystal-clear, and because each home office setup may be different, it's advisable to consult with a tax professional about the home office deduction. Free legal information Web sites like FindLaw (www.findlaw.com) can help you find a tax attorney in your area.

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About FindLaw

FindLaw (www.findlaw.com) is the leading provider of online legal information and solutions for the legal community, businesses and individuals. The FindLaw Internet portal is the highest-trafficked legal Web site, according to leading independent Internet-traffic-monitoring services. The site provides comprehensive, plain-English legal information to businesses and individuals. These resources include West Legal Directory®, the Internet's largest directory of lawyers and legal professionals. FindLaw also offers comprehensive information, resources and services for law practice and legal career development, including free case law, an online career center, breaking legal news, newsletters, message boards, service directories, continuing legal education and legal search tools. In addition, FindLaw provides access to tools and services that help connect legal professionals with potential clients. FindLaw is a division of West, a Thomson business (NYSE: TOC; TSX:TOC) and the foremost provider of integrated information solutions to the U.S. legal market.