Even as more Americans work from home, many of them appear to be missing out on valuable home-office tax deductions, an Internal Revenue Service official says.

"It is questionable whether most taxpayers who are eligible to take the deduction actually do so," IRS National Taxpayer Advocate Nina Olson said in a report to Congress recently. She urged lawmakers to offer taxpayers a simpler, optional method of calculating the home-office deduction.

Among the reasons people don't take such deductions, she says, are the law's complexity and its record-keeping requirements.

Another reason: fear of being audited. Many people believe the home-office deduction is a red flag for IRS agents.

That has long been a familiar refrain: Claim the home-office deduction, and you have an above-average chance of an unpleasant date with an IRS auditor. IRS officials won't disclose details of how they pick which returns to audit or what percentage of those who claim the home-office deduction are audited. But the subject does appear to be a matter of concern. Eric Smith, an IRS spokesman, says that "underreporting of income" by small businesses is one of the highest areas of noncompliance and that "improper" home-office deductions contribute to underreporting by small businesses. To help taxpayers sort through the rules, the IRS has issued a "fact sheet" on the subject.

Even so, several lawyers and other advisers say taxpayer fears of getting audited are exaggerated. They say more people with legitimate home offices should consider claiming the home-office deduction, which would enable them to deduct the business portion of real-estate taxes, mortgage interest, rent, utilities, insurance and other items. They also say it's clear from IRS data that most people who claim the home-office deduction don't get audited.

Nearly 3.2 million returns claimed the home-office deduction for the 2005 tax year, the latest year for which statistics are available, says Mr. Smith of the IRS. That's up from nearly three million returns for 2004.

Be sure to follow the rules -- such as using your home office only for business and making sure it clearly is your "principal" place of business. Consider taking photographs of your office each year and have them time-stamped, just in case you are challenged. You're using your home office now. But three or four years from now, you may be audited and, by that time, you may have gone back to work and are no longer using the space for work.

Small-business owners increasingly are using their home as a primary place for business, Ms. Olson's report says. It cites government data showing the number of home offices jumped about 20% between 1999 and 2005. The report also estimates that slightly over half of small business are home-based but says "many" business owners don't take the home-office deduction. For example, the IRS report says that of the nearly 20 million filers who sent in Schedule C (for sole proprietors) for 2003, only about 2.7 million claimed the deduction.

As Ms. Olson points out, the rules are tricky. To qualify for the deduction, you typically have to use your home office regularly and exclusively as a principal place of business or as a place to meet or deal with patients, clients or customers in the normal course of work. (However, this isn't always true. For example, you don't have to pass the exclusive-use test if you use part of your home as a day-care facility, or if you use it to store inventory or product samples.) If the office is in a separate structure not attached to your home, you have to use it in connection with your trade or business.

If you're an employee, you can claim the deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home isn't rented by the employer, the IRS says.

"Exclusively" doesn't mean "occasionally" or even "most of the time." Suppose you're a lawyer and use a den in your house to write briefs and prepare clients' tax returns. Your family also uses the den for recreation. If so, the IRS says, you can't take a deduction for business use of the den.

Defining "principal place of business" can be especially tricky. The IRS says a single business can have more than one business location. As for whether your home qualifies as your principal place of business, the IRS says the answer depends on "the relative importance" of the activities performed at each place where you conduct business and the amount of time spent at each place.

Years ago, Congress made changes that allowed more taxpayers to qualify for the home-office deduction. Under that law, your home office will qualify as your principal place of business if you use it exclusively and regularly for substantial administrative activities or management of your trade or business -- and you have no other fixed place for your trade or business. Examples of these activities would be billing customers, clients or patients -- or keeping books and records.

For more details, including how to calculate the deduction, see IRS Publication 587 at irs.gov.