This is part of the Home Office series.
Why YOU Should Care:
If part of your home is used for inventory storage or product samples, you may be able to deduct expenses for the business use of your house without meeting the exclusive use test.
- You sell products at wholesale or retail as your trade or business.
- You keep the inventory or product samples in your home for use in your trade or business.
- Your home is the only fixed location of your trade or business.
- You use the storage space on a regular basis.
- The space you use is a separately identifiable space suitable for storage.
Example: Inventory Storage
You make and sell quilts on Etsy. You regularly use part of your basement to store quilts awaiting sale. Your home is the only fixed location for your quilt-selling business. The expenses for the inventory storage space may be deductible.
Example: Product Samples
You sell skincare products online. While the products purchased by your clients are shipped directly from the local warehouse, you regularly store product samples in your second bedroom. Your home is the only fixed location for your skincare product business. The expenses for the product sample storage space may be deductible. How does this differ from the deduction for the business use of your home? Exclusive use is not mandatory. This means that if you regularly store product samples in part of your second bedroom but also use this room for personal purposes when guests come calling, you still qualify.
How to Claim:
The area of your home dedicated to this purpose is entered on line 1 of your Form 8829.