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Principal Place of Business: Home Office Deductions (2025 IRS Guide)

This guide covers “Principal Place of Business” within home office deductions. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 587 (2025), Business Use of Your Home, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Even then, the deductible amount of these types of expenses may be limited. Use this section and Figure A to decide if you can deduct expenses for the business use of your home.

To qualify to deduct expenses for business use of your home, you must use part of your home:

  • Exclusively and regularly as your principal place of business (see Principal Place of Business, later);

  • Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business;

  • In the case of a separate structure that is not attached to your home, in connection with your trade or business;

  • On a regular basis for certain storage use (see Storage of inventory or product samples, later);

  • For rental use (see Pub. 527); or

  • As a daycare facility (see Daycare Facility, later).

Principal Place of Business

You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. To determine whether your home is your principal place of business, you must consider:

  • The relative importance of the activities performed at each place where you conduct business, and

  • The amount of time spent at each place where you conduct business.

Your home office will qualify as your principal place of business if you meet the following requirements.

  • You use it exclusively and regularly for administrative or management activities of your trade or business.

  • You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses.

Administrative or management activities.

There are many activities that are administrative or managerial in nature. The following are a few examples.

  • Billing customers, clients, or patients.

  • Keeping books and records.

  • Ordering supplies.

  • Setting up appointments.

  • Forwarding orders or writing reports.

Administrative or management activities performed at other locations.

The following activities performed by you or others will not disqualify your home office from being your principal place of business.

  • You have others conduct your administrative or management activities at locations other than your home. (For example, another company does your billing from its place of business.)

  • You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room.

  • You occasionally conduct minimal administrative or management activities at a fixed location outside your home.

  • You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home.)

  • You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead.

Figure A. Can You Deduct Business-Use-of-the-Home Expenses? (See Footnote)

Figure A. Can You Deduct Business-Use-of-the-Home Expenses? (See Footnote)

Footnote: Do not use this chart if you use your home for the storage of inventory or product samples, or to operate a daycare facility. See Exceptions to Exclusive Use, earlier, and Daycare Facility, later.

Summary: This flow chart is used to determine if business use of your home is deductible.

Start

Decision (1)

Is part of your home used in connection with a trade or business?

  • IF Yes Continue To Decision (2)
  • IF No Continue To Process (a)

Process (a)

No deduction

  • Continue To End

Decision (2)

Are you using the part of your home as an employee?

  • IF Yes Continue To Process (a)
  • IF No Continue To Decision (3)

Decision (3)

Is the use regular and exclusive?

  • IF Yes Continue To Decision (4)
  • IF No Continue To Process (a)

Decision (4)

Is it your principal place of business?

  • IF Yes Continue To Process (b)
  • IF No Continue To Decision (5)

Process (b)

Deduction allowed

  • Continue To End

Decision (5)

Do you meet patients, clients, or customers in your home?

  • IF Yes Continue To Process (b)
  • IF No Continue To Decision (6)

Decision (6)

Is it a separate structure?

  • IF Yes Continue To Process (b)
  • IF No Continue To Process (a)

End

Example 1.

Sid is a self-employed plumber. Most of Sid’s time is spent at customers’ homes and offices installing and repairing plumbing. Sid has a small office at home that is used exclusively and regularly for the administrative or management activities of the plumbing business, such as phoning customers, ordering supplies, and keeping the books.

Sid writes up estimates and records of work completed at the customers’ premises. Sid does not conduct any substantial administrative or management activities at any fixed location other than their home office. Sid does not do direct billing. Sid uses a local bookkeeping service to bill customers.

Sid’s home office qualifies as a principal place of business for deducting expenses. Sid uses the home office for the administrative or managerial activities of the plumbing business and has no other fixed location where these administrative or managerial activities are conducted. Sid’s choice to have billing done by another company does not disqualify the home office from being their principal place of business. Sid meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home.

Example 2.

Alex is a self-employed sales representative for several different product lines. Alex has an in-home office that is used exclusively and regularly to set up appointments and write up orders and other reports for the products Alex sells. Alex occasionally writes up orders and sets up appointments from a hotel room while away on business overnight.

Alex’s business is selling products to customers at various locations throughout an assigned territory. To make these sales, Alex regularly visits customers to explain the available products and take orders.

Alex’s home office qualifies as a principal place of business for deducting expenses for its use. Alex conducts administrative or management activities there and has no other fixed location where substantial administrative or management activities are conducted. The fact that Alex conducts some administrative or management activities in a hotel room (not a fixed location) does not disqualify the home office from being a principal place of business. Alex meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home.

Example 3.

Taylor is a self-employed anesthesiologist. Taylor spends the majority of the time administering anesthesia and postoperative care in three local hospitals. One of the hospitals provides a small shared office where Taylor could conduct administrative or management activities.

Taylor very rarely uses the office the hospital provides but instead uses a room at home that has been converted to an office. Taylor uses this room exclusively and regularly to conduct all the following activities.

  • Contacting patients, surgeons, and hospitals regarding scheduling.

  • Preparing for treatments and presentations.

  • Maintaining billing records and patient logs.

  • Satisfying continuing medical education requirements.

  • Reading medical journals and books.

Taylor’s home office qualifies as a principal place of business for deducting expenses for its use. Taylor conducts anesthesiologist-related administrative or management activities there and at no other fixed location where substantial administrative or management activities for this business are conducted. Taylor’s choice to use their home office instead of the one provided by their hospital does not disqualify the home office from being their principal place of business. Taylor’s performance of substantial nonadministrative or nonmanagement activities at fixed locations outside their home also does not disqualify the home office from being their principal place of business. Taylor meets all the qualifications, including principal place of business, so the expenses (subject to certain limitations, explained later) can be deducted for the business use of the home.

More Than One Trade or Business

The same home office can be the principal place of business for two or more separate business activities. Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. You must use the home office exclusively and regularly for one or more of the following purposes.

  • As the principal place of business for one or more of your trades or businesses.

  • As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses.

  • If your home office is a separate structure, in connection with one or more of your trades or businesses.

You can use your home office for more than one trade or business activity, but you cannot use it for any activities that are not related to a trade or business.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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