Mortgage brokers, Real estate Brokers and Note Brokers can often take home office deductions.

Obviously you must have a home office. This space must be a separate space used exclusively for an office. So putting the laptop computer onto the dining room table won't qualify.

Most of your work for your business must be done at your home office in order to qualify for the home office tax deduction. You must document your expenses and maintain up-to-date and detailed records.

The real estate and mortgage business is changing, due to technologies that make it possible to work from home. These of course include home computers, email, fax machines, copy machines. All of which are now inexpensive and powerful enough to enable you to run a real business from home.

Almost 50 million people are taking the home office deduction. And the rules have been relaxed as the IRS consider home office to be pro-family.

Under the Taxpayers Relief Act, the definition of a "principal place of business" was expanded to include office-in-homes if:

1. The office is used by the taxpayer (mortgage broker, real estate agent, note broker or Realtor®) to conduct administrative or management activities of the business;
2. There is no other fixed location where the taxpayer conducts substantial administrative or management activities of the business.
   1. However, a taxpayer won't necessarily be disqualified from deducting his expenses under the following exceptions:
   2. The taxpayer can still carry out management or administrative duties at the Broker's office, as long as his principal place of business is still the in-home office.
   3. The taxpayer does not necessarily have to meet with clients in his home office to be allowed the deduction.

1. The part of your home used for your real estate business must be used only for your home office (so the children can't use your computer, for example)
2. The home office can't be in an open area -- it has to be "lockable" and separately identifiable. 
3. HIDDEN TRAP. You will be required to depreciate the space you deduct When you eventually sell your home you may be required to pay capital gains tax on any gain made on that part of the home. Check with your CPA for the up to date ruling on this.
4. You can deduct a proportion of all expenses, such as a portion of your electric bill for the home and a portion of the rent you pay if you rent your home.

You are denied a deduction for basic local telephone charges. Long distance, optional services (like call waiting) and extra lines may be deductible.

Other benefits include a more flexible schedule, less commuting, less stress, more free time to pursue other interests and convenience. But beware you may not realize more free time if you find work to fill those extra hours in your office that is just at the end of the hall.

It is also important to treat the home office as a real office and not have small children answer the phone to clients, for example. 

As always, the above article is intended to be accurate and informative. Please consult your tax advisor for help on your personal situation.

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