What can I deduct when I have a home office?

I am going to chiropractic school and when I graduate i would like to have an office w/ an apartment upstairs and live upstairs? Will this constitute a "home office" if so what can I deduct? What about if I rent the upstairs apartment out and do not live there can I deduct anything then? I mean deduct for tax purposes...heating/cooling, phone, internet, water, etc

I assume you will be self-employed.

If you live in part of the house and use the other part of the house for business, you can use Form 8829 Business Use of Home. The expenses related to business use are deductible. In addition, expenses of the entire house are deductible in proportion to the square footage of the house used for business. These expenses reduce your gross income from your business as reported on Schedule C.

Read the instructions to Form 8829 to familiarize yourself with the deductions.

http://www.irs.gov/instructions/i8829/ch...

If you rent the upstairs and use the downstairs for business, you have a different situation. The upstairs unit will be a residential rental property and you will report income and loss on Schedule E. The downstairs unit will be a nonresidential business property which you will deduct on your Schedule C using Form 8829 as described above.

I would like to correct the last paragraph. If you rent the upstairs and use the downstairs for business, it is a nonresidential business property and you use Schedule C Part II to deduct the depreciation, mortgage, utilties and other expenses of the property. You do not use Form 8829. Report It

You can deduct business equipment like computers, phones, and the like. You can also deduct a portion of the rent or mortgage payment for the rent on your home office. Whatever you feel is dedicated to your business can be an expense item. Just don't go overboard, doggy treats to keep the pet from bothering you while you're working is probably a stretch, although perhaps not.

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