To claim a home office as a deduction at tax time, you must be able to answer yes to the following two questions:

Is the room used exclusively and regularly as an office for your trade or business? (No doubling as a guestroom.)

Is it either your principal place of business or a place you meet regularly with patients, clients, or customers? If, for example, you are a self-employed interior designer who works with clients in their homes but does all billing and other administrative work in a home office, your home office would still qualify as your principal place of business and therefore be deductible.

If you are an employee, rather than self-employed, you must also be able to answer yes to following question:

Does your employer require you to work at home? If, for example, your employer allows you work at home just so you can avoid a long commute, you can't take the deduction.

If you meet the criteria above, you can deduct a percentage (based on the square footage of the office) of the following items: rent, mortgage interest, real estate taxes, home depreciation, utilities, security system, services such as garbage removal, insurance, and repairs. If you're self-employed, your deduction can't be greater than the amount of money you made in a given year, although you can transfer the overage into the following year. As an employee, your deduction must be more than 2 percent of your income to qualify.

You don't need to take the home-office deduction to claim the following, if they are necessary, used exclusively for business, and not reimbursed by your employer: telephone, furniture, computer, fax, modem, printer, Internet service, supplies, or renovation of the space.

Consult an accountant before taking a home-office deduction, since complex (and expensive) issues involving taxes and depreciation may arise when you sell your house. "If you're planning on moving or selling soon, it might not pay," says Ed Slott, a certified public accountant in Rockville Centre, New York. "You might kill a bigger exemption."