Taxpayers, such as attorneys, doctors, dentists, and other professionals, often use part of their homes for business concerns. Taxpayers may deduct expenses related to the business use of part of their home if certain requirements are met. Part One examined the exclusive and storage uses of the home and how they relate to qualifying for the expense.
A specific area of the home must be used for business on a regular basis. This use may not be incidental or occasional. All facts and circumstances must be considered in making any determination about use on a regular basis.
Trade or Business Use
Part of the home must be used in connection with a trade or business. If the activity, even if for profit, is not a trade or business, a deduction for business use may not be taken.
Principal Place of Business
A home office will qualify as a principal place of business if the following requirements are met:
- The home is used exclusively and regularly for administrative or management activities of the trade or business; and
- There is no other fixed location where substantial administrative or management activities of the trade or business are conducted.
Place to Meet Patients, Clients, or Customers
If patients, clients, or customers are met in a home in the normal course of a business, even though the business also operates at another location, the expenses may be deducted for the part of the home used exclusively and regularly for business if both of the following tests are met:
- Patients, clients, or customers are physically met with on the premises; and
- Their use of the home is substantial and integral to the conduct of the business.
Attorneys, doctors, dentists, and other professionals who operate an office in their homes typically have no issues meeting this requirement. However, using a home for occasional meetings and telephone calls will not qualify the expenses as deductible for the business use of the home. The part of the home used exclusively and regularly to meet patients, clients, or customers does not have to be a principal place of business.
Expenses for separate free-standing structures, such as studios, workshops, garages, or barns, may be deducted if used exclusively and regularly for business. The structure is not required to be a principal place of business or a place where patients, clients, or customers are met.
If you operate a home business and have questions about deducting its use to the full extent allowable, call The Gartzman Law Firm at (770) 939-7710. Use our simple contact form to arrange a free consultation with a qualified tax professional today.