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If you own property that you rent and report the income and expenses on Schedule E (Form 1040) Supplemental Income and Loss, you are not eligible to claim expenses for business use of your home.

The IRS generally considers a property owner to be involved in a “passive” investment activity rather than an “active” income earning activity even if the property owner actively manages his or her properties.

The IRS expects you to pass certain tests to be able to claim expenses for business use of a home.

The home office must be:

  • used 100% for business purposes;
  • used regularly for business purposes;
  • for your trade or business; and
  • your principal place of business.

Being a landlord or manager of your investments does not count as a trade or business. Although you are not able to claim business use of home expenses when filing Schedule E, you also are not required to pay self-employment taxes, as you would be subject to when claiming trade or business profit on a Schedule C (Form 1040) Profit or Loss From Business.

For more information on home office deductions, please refer to IRS Publication 587 Business Use of Your Home (Including Use by Daycare Providers).

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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