Surprising tax deductible expenses range from guard dogs to gambling losses and more. But as taxpayers nationwide scramble to calculate their last-minute deductions in order to maximize this year’s refund, some will be disappointed to find that a home security system is not one of those qualifying items—except in one special case.
If you use your security system to protect a home office (or a space where you conduct business like a home daycare), you might be able to add it to your list of deductions.
However, your office and business must still meet certain standards before you can deduct the cost of a security system. The IRS states that you can only claim a home office deduction “if you use that part of your home regularly and exclusively” for business purposes under one of the following circumstances:
1. Is your home office in a building detached from the rest of your house?
If your workspace is located in a separate building from your house, such as a detached backyard studio or a similar setting, and is used in conjunction with your trade or business, you can deduct the cost of a security system protecting that space.
2. Is your office located inside your house, but used as your principal place of business?
The IRS defines the principal place of business as the only fixed location where you conduct most (if not all) of your administrative or management activities.
3. Is your office located inside your house and used for meeting clients?
Your home office does not have to be your principal place of business if you use it “to meet or deal with your patients, clients, or customers.”
But what does “regularly and exclusively” mean?
According to SafeWise, a home security consumer website, this phrasing means that there must be a demonstrable separation, both physical and functional, between your workspace and your living space. For example, family members must never use the office for any purpose not related to your business, whether that’s homework or personal online shopping.
To help maintain that separation, try to set up your office in a room designated only for business use. If space limitations prevent you from claiming an entirely separate room, ensure that there is an obvious, physical partition to delineate where you work versus where any personal activities happen.
Physical separation will not only help you demonstrate that the space is used exclusively for business, but it will also simplify things when it’s time to calculate your deductions. You can only deduct the portion of the security system used to protect your place of business—so although you can use the same system that protects your whole house, you should fill out a worksheet that accounts for your office’s square footage compared to the rest of your home.
Finally, you cannot defer to using your home office only on occasion or as a backup location. You must conduct work there as a normal, integral part of your business.
Based on these guidelines, if you think you are eligible to deduct the cost of your home security system, you might want to consult with a tax professional who can offer expert advice on the easiest, most efficient way to do it.