Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

When may a taxpayer deduct as business expenses the costs related to the use of his residence? Part 2

Posted by William Byrnes on December 29, 2010


Seal of the Internal Revenue Service

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Why is this Topic Important to Wealth Managers? We examine the IRS requirements set out in its Publication 587 for determining when a “part” of a home is used and whether that use qualifies as “exclusively and regularly as your principal place of business”.

Yesterday we opened the discussion by what authority of the Code a taxpayer may be allowed to deduct a business expense for use of part of his home in the pursuit of a trade or business.  Today we turn to the following questions: What type of residence qualifies for this deduction? And the requirements for determining when a “part” of a home is used and whether that use qualifies as “exclusively and regularly as your principal place of business”.

What type of residence qualifies for this deduction? Many taxpayers narrowly consider that the “home office” deduction only applies for the traditional house with the white picket fence.  But the Code’s section does not use the word “home”.  Yesterday we noted that Congress chose the phrase “dwelling unit”.  So what is a dwelling unit?  The Section toward its end contains this definition: “The term ”dwelling unit” includes a house, apartment, condominium, mobile home, boat, or similar property ….”  Thus, taxpayers who are homeowners, condo-owners, renters of apartments, even a boat owner or renter, may potentially leverage this deduction.

What constitutes a “portion” of the dwelling unit? To read this article excerpted above, please access www.AdvisorFX.com

 

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