Do deductions exceed income?
Luckily, and unlike in school, the final exam for home office deductions is the easiest exam to pass. To complete this “income” test you must make sure that the total deductible expenses don’t exceed the income derived from the business for which the deductions have been taken. For example, if total deductions come to $1,200, yet you only earned $950 of income from the business, then only $950 of deductions can be taken for that year. However, the remainder can be carried forward to a future year and deducted when business income exceeds expenses.
