40.14 Allocating Expenses to Business Use

Allocate to home office use qualifying operating expenses (40.13) as follows: If the rooms are not equal or approximately equal in size, compare the number of square feet of space used for business with the total number of square feet in the home and then apply the resulting percentage to the total deductible expenses.

If all rooms in your home are approximately the same size, you may base the allocation on a comparison of the number of rooms used as an office to the total number of rooms.

EXAMPLE

A doctor rents the ground floor of a home and uses three rooms for his office and seven rooms for his residence. The rooms are not equal in size. The entire area has 2,000 square feet; the office has 600. He allocates 30% (⁶⁰⁰/_2,000) of the following expenses to his office:

The $3,240 of office expenses are deductible as indirect interest expenses on Form 8829, subject to an income limitation (40.15).

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Table 40-2 Nonresidential Real Property (39 years—Property placed in service after May 12, 1993)