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Lessons from the Tax Court: Create your own space

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in Small Business Tax,Small Business Tax Deduction Strategies

Do you operate a business from home? You’re entitled to home office deductions only if you regularly and exclusively use the place as your principal place of business or where you meet or deal with customers, clients or patients in the normal course of business. Taxpayers are often tripped up by the requirement for “exclusive” use.

New case: An attorney in Georgia used the first floor of his house for his law practice before moving to an apartment. He then claimed deductions based on the entire first floor of the house plus two of the eight rooms in the apartment (a “computer room” and a “sun room”).

The first floor of the house qualified for home office deductions. It was physically separated from the rest of the house and had a separate entrance and awning.

But the attorney didn’t meet his “burden of proof” for the apartment deductions. He did not offer evidence how the computer room was used nor did he substantiate his claim that the sun room was used to store documents and supplies. Thus, the deductions based on the two rooms in the apartment were denied. (Longino, TC Memo TC Memo 2013-80)

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