If you run you r business out of a room that's 10 by 12 feet, and the total area of your home is 1,200 square feet, the business-space factor is 10 percent. An extra computation is required if your business is a home day care center. This is one of the exempted activities in which the exclusive use rule doesn't apply. Check with your tax preparer and the IRS for an exact determination. If you're a renter, you can deduct the part of your rent which is attributable to the business share of your house or apartment.
Homeowners can take a deduction based on the depreciation of the business portion of their house.
There is a limit to the amount you can deduct. This is the amount equal to the gross income generated by the business, minus those home expenses you could deduct even if you weren't operating a business from your home. As an example, real estate taxes and mortgage interest are deductible regardless of any business activity in your home, so you must subtract from your business' gross income the percentage that's allocable to the business portion of your home. You thus arrive at the maximum amount for home-related business deductions. Even so, it is always wise to keep meticulously within the proper guidelines, and of course keep detailed records if you claim business related expenses when you are working out of your home.