Home Sweet Home Can Mean Big Vehicle Deductions

Today more businesses and professionals are home-based than ever before. Almost every occupation–consultants, accountants, sub-contractors, plumbers, Realtors, programmers and sales people of every stripe don’t need a bricks and mortar workplace.

And, working from home in your PJs means you might qualify for the tax code’s “home office” deduction for otherwise non-deductible living expenses.

First question: Does your venture meet the tax rules for a “home office?’

Answer: Yes, if you can pass a three part test. The home office must be:

(1) your principal place of business, and

(2) in a separately identifiable space, and

(3) regularly and exclusively used for business. (See irs.gov or my book, Tax Savvy for Small Business (Nolo) for details on meeting the three rules for the home office deduction and a list of all home expenses that can be shared with Uncle Sam).

Bottom Line: A home office deduction can be a HUGE tax saver.

A big plus for vehicles: A home office means you are no longer penalized for using your car to commute to work. All trips from your home office to a job site, client visit or to Office Depot are fully deductible business miles.

Good to Know: Home offices were once an IRS audit red flag. That was before the revolution in communications technology, which has greatly increased the opportunities for working from home. Even the IRS has come around to realize the facts of modern business life, and it no longer audits businesses just because they are home-based.

Frederick W. Daily, J.D, LL. M (tax)
Frederick W. Daily, J.D, LL. M (tax)

Fred Daily is a tax attorney with over four decades of experience in the tax field. He has given tax programs for CPAs, Enrolled Agents and even the IRS. Fred has been quoted in the New York Times, Wall Street Journal, and has appeared on CBS, NBC, Fox, NPR news features and ABC’s Good Morning America. He is an author of books on taxes and his website, taxattorneydaily.com features a wealth of tax tips for minimizing taxes and dealing with IRS issues.