A friend and I want to start a small business. Are there any tax benefits for doing this out of the home that we currently rent? Can we claim the home office deduction?

In order to claim home office deduction for your business, you have to meet couple of tests:

 

1. Regular and exclusive use you have to use part of your home regularly and exclusively for your business. You cannot use the designated place for personal purposes.

 

2. Principle place of your business you use your home substantially and regularly to conduct business. If you qualify, you can deduct percentage of your rent, utilities, insurance and other necessary home related expenses as business expense. You can also opt out for a standard method and deduct $5 per square foot of the used space instead.