How do I claim my home as office If both me and my wife have different businesses?

I would allocate it based on the amount of time spent in the home office by each of you. Of course, that might be the same amount, so any reasonable method of allocation should be okay. The trick is to make sure you don't double dip between the 2 Schedule Cs.

While the home office is certainly something the IRS will look at if your return is selected for audit, the mere fact that one has a home office does not actually seem to be an audit flag. The exact scoring system the IRS uses for audits is a closely kept secret, but studies seem to indicate those who claim home offices are not unduly selected more than other business owners.

Additionally, with the passage of the Section 121 changes almost 11 years ago, home offices went from so-so as far as deductions were concerned to very favorable. One no longer must allocate business/home use on the sale of the home (unless the home office is in a separate structure).

Depreciation must be recaptured as a capital gain subject to a maximum rate of 25% (not as ordinary income), but paying a small amount of tax later for big tax savings now is a good deal.

I did that, too, but you have to know what is deductable - you'd be amazed at what you can deduct when you do it, but you better get it right. In our state you add up everything and you get to take off 33% of all of it - mortgage, ins., utilities, phones, cells, internet, office supplies, travel expenses, ads, even gifts up to $25.00 for all clients or employees. But, you have to show that your office is seperate. Also - do you pay for your own health ins.? You really need to bite the bullet and talk with a real CPA, not someone who took a 2 week course to work at Jackson Hewitt or H & R Block. (I know that's all they do - I have a friend who works there and all they did was teach her how to run their software program which is like Quicken.) Call some licensed CPA's in your area and find one who is familiar, and, preferably, specializes in home based businesses. Just talk with him/her. You will be amazed - it costs me anywhere from $100 to $150 dollars my CPA, but it gets me more than 2 or 3 times what I'd usually get back. It is crazy not to look into it, and if need be, you can have them amend your last 2 yrs taxes and recoup any loss from there, as well.

Just to add to what the others have said. Taking a home office deduction raises red flags at the IRS. Read the rules, you can likely still do it, if the space is 100% business use and you can document it.

Keep in mind that another trick of the home office deduction is the recapture of depreciation. Any depreciation allowed (it doesn't need to be taken) is subject to recapture. When you sale your home the amount of depreciation taken will be taxed as ordinary income. Unless you sale your home at a loss.

Estimate total percentage of house used, divide by two or whatever percentage you deem appropriate. Be pretty sure you are accurate - as home offices are red flags for the IRS.

suggest u don't

'home offices' are the best red flag for IRS audits.

especially since u both use it.

the 'deduction' vs audit costs aren't worth the hassles. exception = office 400+sq ft.