If you conduct business at more than one location, you are eligible for the deduction only if your home is your principal place of business. You must consider both the relative importance of the work performed at each location and the amount of time spent at each location. Even if your home office is your only office, you use it to set up appointments, you do your billing there, and so on, you still don't qualify if all your work is done on client's sites. Employees cannot take the deduction if they rent all or part of their home to their employer and then use that portion to perform services as an employee, or if the use of their home is for their own convenience, and not for their employer's. Once you have determined that you are eligible for the deduction, you calculate the percentage of your home used for business based on square footage, number of rooms, or any other reasonable method.
Direct expenses are completely deductible.
Usually, the business fraction of indirect expenses is also deductible. Electricity is used for lighting both home and business areas, but also for non-business reasons such as laundry, television and cooking. Only the business portion of electricity for lighting is deductible. Unrelated expenses are never deductible. If your total business expenses exceed your business income, the deduction for certain expenses for use of the home will be limited.