The Tax Reconciliation Act of 2001 includes two changes to home office deductions. The first is acknowledgement of a home office as a legitimate part of small business practice. Any individual -- whether a business owner or an employee -- who uses a room for work regularly and exclusively can take a home office deduction.
Second, in addition to taking the reserved office space as a percent of house use, one can include space in the basement or garage, even closets, that contains supplies. This applies even if the space isn't used exclusively for work. So if you store files downstairs, maintain a basement workshop, keep materials in a shed, or keep company vehicles in a garage, you can include this additional footage in your home office calculation. --Howard Scott is a business writer and small business tax preparer in Pembroke, Mass.