Under the current rules, if the home office is within your home, you don't need to pay taxes on the appreciation applicable to the portion of the home claimed as the home office. You do need to pay taxes on any depreciation you claimed over the years.

To claim the home office, a portion of your home needs to be used regularly and exclusively in connection with your profession. The rules don't state that the home office needs to be a separate room in your home.

If you're self-employed, you'll take the home office deduction directly against your income. If you're an employee, you claim the expenses along with your other unreimbursed professional expenses as a miscellaneous itemized deduction. Watch out for the AMT, however, since miscellaneous itemized deductions aren't allowable when calculating this tax.

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