Question

Please advise James and Maria as to whether their situations qualify for the Business Use of Home Deduction and write them a memo/or memos.

James and Maria moved into a new home at the beginning of the year and James set up a home office in one of the rooms for his business. James works as a business consultant. He works mainly from home and meets his clients at their place of work, coffee shops, and sometimes in his home office. The home office is not really used aside from James’ work as he prefers to restrict his time in there to business hours. James knows there is some sort of business deduction allowed for his use of this space and wants to prorate his mortgage interest and utilities to take as part of this deduction. He thinks it is fair to be able to deduct his entire internet bill each month for his office use deduction as he said that the reason they chose such a large internet package is for his business. He would also like to deduct the lawncare expenses as he stated he would not bother with the lawn except for that the exterior of his home needs to look nice for his clients.

In addition to James’ business, Maria is wondering if she should set up a home office. The benefits seem so great tax-wise and she would like to be able to spend a little more time at home. Maria is a doctor and is employed by a general health clinic. There is a spare room with an entrance from the outside that she would like to set up as a checkup room where she could see clients for about 10 hours a week. She figures that all of the remodel costs to ready the room would be deductible as part of the home office expense.

Answer 1

James idea for setup a home office in there in new home is advisable as all the expenses related to his business are allowed as deductions:

1.Mortgage Interest and utilities are eligible for Deductions for home office

2.Since Internet connection is technically a necessity if you work at home, you can deduct some or even all of the expense when it comes time for taxes. You'll enter the deductible expense as part of your home office expenses. Your internet expenses are allowed as deductible because james said that the only reason to choose that internet is for Business purpose.

3.Lawncare expenses are eligible for deductions for home office according to the tax court, sole propritors who regularly meet clients in a home office,

Where as Maria Idea to set up a home office is not best option to claim deductions under Home office deduction eligibility because remodel cost of room is capital expenditure.

Capital expenditure cannot be deducted against income of a business. Further more if part of the premises included an office which was used for the purpose of business then eligble for deduction on prorata basis where the applicable deduction value is less when compared to James Plan