Can you deduct home storage of inventory?

What the publication says

Publication 587 treats storage as one of the two exceptions to the exclusive use test. If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test, provided you meet all of five tests. The word all matters: missing one means the exception is unavailable and the space must meet exclusive use like any other.

The five tests are these. You sell products at wholesale or retail as your trade or business. You keep the inventory or product samples in your home for use in your trade or business. Your home is the only fixed location of your trade or business. You use the storage space on a regular basis. And the space you use is a separately identifiable space suitable for storage.

The mechanics tool example

The publication gives one example. Your home is the only fixed location of your business of selling mechanics’ tools at retail. You regularly use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. The facts line up with the five tests one by one: retail sales, inventory in the home, home is the only fixed location, regular use, and a separately identifiable half of the basement.

Why the only fixed location test matters most

For many sellers, the third test is the deciding one. An online seller who ships from home and has no store, warehouse or leased space meets it. A seller who rents a unit, uses a fulfillment center, or runs a shop does not have a home that is the only fixed location of the business. The publication does not define fixed location in this section beyond that phrase, and it uses the contrast in the principal place of business discussion between fixed locations and places that are not fixed, such as a car or hotel room. If you are unsure whether a third-party warehouse counts, ask a tax professional rather than assuming it does not.

What does not qualify

The exception is written for products held for sale or as samples. It does not turn a garage full of household items, tools for personal projects or business records into a deductible storage space. A service business with no inventory does not use this exception. Equipment you use in the business is not inventory. Inventory you store at a rented storage unit is a different expense. If your storage space is also your office, the office must meet exclusive use on its own, and only the storage area benefits from the exception.

Figuring the amount

Qualifying under the storage exception only opens the door. The deduction is still figured under actual expenses or the simplified method. For actual expenses, you compare the storage area to the total area of the home to get the business percentage, apply it to indirect expenses such as utilities and insurance, add direct expenses for the storage area, and apply the deduction limit. See how to figure the percentage of your home used for business. For the simplified method, multiply the allowable area, up to 300 square feet in total across all qualified uses, by $5, subject to the gross income limitation. The publication says that when you have more than one qualified business use, the 300 square foot maximum is shared and you allocate it reasonably.

This example is not from the publication. A seller whose storage shelving takes up 150 square feet of a basement could claim $750 under the simplified method (150 times $5), as long as gross income from the business use of the home less unrelated business expenses is at least that much.

Related rules

Because storage is an exception to exclusive use, read what exclusive use means for a home office for the general rule. If your stock is kept in a separate building, the separate structure rule may be easier; see can a detached garage be a home office? And to compare the amount under both methods, use the simplified vs regular home office deduction calculator. Records matter: the publication says your records must show the part of your home used for business and the expenses for the business part.

Sources

• IRS Publication 587, Business Use of Your Home (2025): Qualifying for a Deduction: Exceptions to Exclusive Use; Storage of inventory or product samples. Read November 2, 2026.

Edition read: Publication 587 (2025), for use in preparing 2025 returns. Dollar figures and rates in the publication are for 2025; check IRS.gov/Pub587 and the instructions for Schedule C and Form 8829 for your tax year. This page summarizes the publication and does not replace it. Marked for human review.