Running a business from home can help you lower your tax bill.

When you use part of your home for business, you may be able to deduct expenses for what the IRS calls the "business use of your home." If you meet the technical requirements of the tax law, you should be able to deduct a percentage of many of the costs of running your home, such as utilities, rent, insurance, depreciation, mortgage interest, real estate taxes, and some casualty losses, repairs, and improvements (if they relate to the part of the house you use for business).

The home office deduction is available to renters and homeowners alike. It is available for office space and other areas you use for business in your home -- such as a studio, workshop, or garage. And according to the IRS, your "home" can be a house, condo, or apartment unit -- or even a mobile home or boat, as long as you can cook and sleep there. However, you must meet two tax law requirements to qualify for the home office deduction:

Requirement #1: You must regularly use part of your home exclusively for a trade or business.

Requirement #2: You must also be able to show at least one of the following:

• You use your home as your principal place of business.
• You meet patients, clients, or customers at home.
• You use a separate structure on your property exclusively for business purposes.

We'll explain these requirements in turn below.

Ordinary business expenses are deductible even if you don't qualify for the home office deduction. If you don't meet the rules above, you can still deduct ordinary and necessary business expenses that arise at your home --for instance, long-distance phone calls, a separate business telephone line, and the cost of office supplies and equipment. The above IRS rules apply only to home-connected expenses such as utilities, rent, depreciation, home insurance, mortgage interest, real estate taxes, and repairs.