In order to qualify for the deduction, the part of the home used for business must be for the exclusive and regular use of the trade or business. The requirements impose further restrictions on an employee's use of a home office. An employee must also use the home office for the convenience of the employer and the employee cannot rent the home office to the employer. Exclusive use requires use of a specific room or separately identifiable space for business purposes only. If the home office is used for some other purpose, it will not qualify for the home-office deduction.
Exceptions apply for storage space and day care facilities.
Regular use denotes use of the home office on a continuing basis. The taxpayer will not meet the regular use test if the business use is occasional or incidental even if it does meet the exclusive-use test. The home office must be used in connection with a trade or business. If the home office is used to carry on activities related to investments, for example, it will not qualify as used in connection with a trade or business. Although a taxpayer can have more than one business location, the home office must be the principal place of business .