An excerpt from the Five-Minute Tax Briefing from Thomson Reuters
Although many taxpayers avoid claiming a home office deduction for fear it will trigger an audit, an IRS tax tip summarizes the qualification rules. Generally to claim a deduction, the taxpayer must use part of the home regularly and exclusively for business purposes, and the part used for business must be (1) the taxpayer’s principal place of business; (2) a place where the taxpayer meets with patients, clients, or customer in the normal course of business; or (3) a separate structure (not attached to your home), such as a workshop, studio, or garage. Editor’s note: The “exclusive use” test need not be met if the taxpayer uses the home office to store inventory or product samples, or operate a daycare facility.
If the taxpayer is employed, an additional rule must be met (which often bars the taxpayer from claiming a deduction): the business use must also be for the employer’s convenience.