Tax Reform
As part of last year's budget bill, Congress broadened the home office deduction's availability under the definition of "principal place of business." Under previous law, those not using their homes for meeting clients or storing inventory couldn't claim the deduction because the law did not recognize their residence as a "principal place of business." If a homeowner used the home office only to carry out administrative tasks while performing "the essence of his professional service" elsewhere, the home office could not qualify.

Under the new law, a home office qualifies for the deduction, "if the office is used by the taxpayer to conduct administrative or management activities of a trade or business, and there is no other fixed location where the taxpayer conducts substantial administrative activities." The change takes effect for the 1999 tax year.

Popular Among Home Buyers
Adding to the favorable tax changes are economic trends that make the home office a valuable feature for resale purposes. As more telecommuters and consultants turn to working out of the home, the home office increases in popularity and resale value, says Remodeling Magazine.

Homeowners who add on a home office can expect to recoup an average of 69% of the construction cost at resale, according to Remodeling's 1998 Cost vs. Value Report. The cost of building on a home office is $8,179 and the resale value is $5,679, according to Remodeling's national average.