Principal Place of Business Test
When can I deduct the business use of my home?
The principal place of business test is met if you use a portion of your home:
As your principal place of business; or
As a place of business used by your patients, clients or customers to meet or deal with you in a normal course of running your business; or
In connection with your business if it is a separate structure that is not attached to your home.
Example of the principal place of business test
For example, if you are a day care service provider operating out of your home, a free lance writer, a mail order seller, or use your home to make money in a business, you meet the test. The home business does not have to be your full time job.
If you have a full time job during the day and at night you make jewelry for sale. Your home office is the main place of business for this jewelry making business. You pass the principal place of business test.
Having more than one place of business (multiple business locations)
If in the course of your business you operate at more than one place, you must determine whether the office in your home is the principal place where you have your business.
Definition of principal place of business
Principal place of business means that the main location of the business activity is located in your home office. In general, it is the place where your money is actually earned.
For more than one location, you must assess the relative importance of the business carried on at each place and the time spent at each place of business.