Overseas Foreign Earned Income; Can I take the Home Office Deduction for a home office based outside the United States?
In short I live and work overseas. For the past few years I've passed one of either the tests to qualify for the FEI exemption. During this time I've also been doing some web design work for US clients, and have created a small part time business reporting that income on a Schedule C. I've been funnelling that income directly into student loans and so it doesn't even leave the US.
This year I'd like to explore taking a home office deduction as by all indications I seem to qualify - a dedicated space in my home, a computer that is used wholly for that work etc. I cant find any discussion or guidance stating that the home office must be in the US. Am I pushing my luck here?
Thanks a lot for your thoughts.
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You are pushing your luck, but not because you're not in the US, because it is likely that you're not qualified. From what you said, I doubt you can take it (I'm not a professional though, get a professional opinion).
You say "dedicated space". It has to be an exclusive room. You cannot deduct 10 sq. ft. from your living room because your computer that is used wholly for your business is there. It has to be a room that is used exclusively for your business, and for your business only. I.e.: nothing not related to the business is there, and when you're there the only thing you do is working on your business.
Your office doesn't have to be in the US necessarily, to the best of my knowledge. Your office must be in your home. If you take primary residence exclusion as part of your FEI, then I doubt you can deduct as well.
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