Part 2 Business Income and Deductions question: home office

Part 2Business Income and Deductions

Tim runs his bookkeeping business from his dining room table, which his family also uses for meals. Can he deduct a home office?

A Yes, because it is his principal place of business for the work
B Yes, but only under the simplified method
C Yes, if the business has a profit
D No, the use is not exclusive

Show the answer and explanation

Answer: D. No, the use is not exclusive

A home office deduction requires that the specific area be used regularly and exclusively for business (with exceptions for storage of inventory and day care). A dining table shared with family meals fails the exclusive use test, whichever method is used. Source: IRC 280A(c)(1); Pub. 587 (2025), Exclusive Use. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Allowing a home office for shared living space.

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On December 1, 2025, a cash-method business paid $12,000 for 12 months of office rent starting that day. Applying the 12-month rule of the capitalization regulations, how much can it deduct for 2025?Lu uses 400 square feet of her home regularly and exclusively as her principal place of business and elects the simplified method for 2025. Her business has ample income. What is her home office deduction?A calendar-year corporation formed in 2024 wants S status starting January 1, 2025. March 15, 2025 fell on a Saturday. By what date must it have filed Form 2553 for the election to be timely?

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.