 Income tax 2021-2022, business use of your home. Get ready to get refunds to the max, dive in to income tax 2021-2022. Most of this information can be found in Publication 334 Tax Guide for Small Business Tax Year 2021 income tax formula, looking at line one income, which would have a sub-schedule, basically an income statement with income and expenses. We're focusing in on the expenses here, them basically being deductions that net then would be rolling in to line one income of the income tax formula as well as page one of the form 1040 we see here on the tax return, schedule C rolling into the schedule one, schedule one rolling into page one of the form 1040, we see here line number eight. We got the schedule C profit or loss from the business, basically an income statement. We're now focusing in on the expenses, which are basically deductions and we're looking at those deductions that are related to the business generally on the schedule C or related schedules to the schedule C for the business. So we got the business use of your home now. So now we have a situation where you're thinking ordinary and necessary expenses are typically those deductible expenses. If I did my work for my business at some other location and I rented it for example or purchased it, you would think that I would get the deduction for the rental or possibly the depreciation and so on related to the place. But of course, what if I work from my home, which is my personal home, but now I have a business component to it. Do I get to deduct part of it as the business? And then typically you would think you would get to deduct some of it for the business. You would have to find some kind of ratio to break out the business portion. If you're renting the home, then you can allocate possibly some of the rent maybe as part of the deduction. If you're purchasing the home, you've got some information or some issues with deductibility possibly on the Schedule C for business related items for things like interest on the mortgage interest possibly and things like the property taxes. But those also may be deductible somewhere else for non-business related items such as itemized deductions on the Schedule A. So now you've got this allocation issue that you would have to deal with in that instance. Okay, so to deduct expenses related to the part of your home used for business, you must meet specific requirements. Even then your deduction may be limited. So you got to make sure that you're picking up the proper requirements. This can be a significant deduction and it's one that is based on some estimates. Therefore, it's also one that the IRS might be a little bit more critical about, might be a little bit more weary or looking into or want to basically audit from time to time. So you want to make sure that you have the proper documentation with relation to it. To qualify to claim expense for business use of the home, you must meet the following tests. So test number one, your use of the business part of your home must be exclusive. So now we've got this exclusivity test. However, you have exceptions to the exclusive use that you could take a look at later. So the general rule here is that exclusive is the test A and then B, regular and C for your business. So once again, your use of the business part of your home must be A, exclusive, B, regular and C for your business. Number two, the business part of your home must be A, your principal place of business defined later. So now we got this term, it's got to be your principal place of business because obviously you might have business in different areas and maybe you only use part of your house for things that aren't your principal kind of business. Then the question is, what is the principal business? Because some businesses, of course, you work from that particular location. If you're working online or something like that, that would probably be the case. You'd be in one set spot. Other types of businesses, you're moving around a lot. You're doing more work possibly at clients and things like that. So therefore, you might spend most of your time away from a particular central location in that case, but you might be doing your executive work in one place or your administrative type of work in one place, which might be one way we can try to define your place of business. So B, a place where you meet or deal with patients, clients or customers in the normal course of your business. C, a separate structure not attached to your business you use in connection with your business. So exclusive use, what does that even mean? To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business.