A favorite question posed by many taxpayers is “Can
I deduct a portion of my home expenses if I perform
some work at home?”.
The IRS has set out specific guidelines for the
Business Use of Home deduction.
In order to claim expenses for business use of
your home, you must use part of your home exclusively
and regularly as your principal place of business.
This principal place of business must be for
the particular trade or business you are claiming
the deduction. Some considerations include the
relative importance of the activities performed
and the amount of time spent at each place you
conduct business. If the portion of your home
that is claimed for business is used for business
and personal use, then the exclusive use test
is not met and the home office deduction is not
available.
To be used exclusively on a regular basis
the business portion of the home must be:
- The principal place of any business carried
on by you the taxpayer,
- A place of business used by patients,
clients or customers in meeting
or dealing with you in your normal
course of business
or
- A place used in connection
with your business if
you are using a separate
structure that
is connected with, but
not attached to, the home
If you use your home office exclusively and regularly
for administrative or management activities of
your trade or business and you have no other
fixed location where you conduct substantial
administrative or management activities of your
trade of business then you qualify for the deduction.
Some examples of administrative and management
activities are billing customers, clients or
patients, keeping books and records, ordering
supplies, setting up appointments or forwarding
orders and writing reports.
If you perform some administrative and management
activities at other locations, you are not automatically
disqualified for the deduction. Examples include:
someone else performing these activities at locations
other than your home; you conduct these activities
at places that are not fixed locations, such
as your car or a hotel room; you occasionally
conduct minimal activities at a fixed location
outside your home; or you have other locations
but choose to use your home.
Your deduction for Business Use of Home may also
be limited due to ordering rules set out by the
IRS. These rules list, in specific order, how
to apply your business deductions against gross
income. The rules prevent a taxpayer from recognizing
a loss due to the Business Use of Home deduction.
For more information on the Business Use of Home
deduction and how you can benefit, please consult
with your tax advisor.
Tax Topic provided by Dottie L. Lloyd, CPA, Tax
Manager, Jones and Company, Ltd., Paragould,
AR
|
