Tax Planning

When the Second Office In a Home is a Principal Place of Business

Aug 1, 2021

Bradford Tax Institute

When possible, you want to claim that your office in your home qualifies as a principal place of business, because this classification:

  • gives you the home-office deduction, and
  • eliminates commuting from your home to your regular office.

Current law gives you two ways to claim your office in the home as a principal office:

  • First, as a principal office under the rules that the Supreme Court finalized in Soliman
  • Second, as a principal office under the alternative after-Soliman rules, where lawmakers added this alternative: “… the term principal place of business includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business”

Question for you: If you have an office downtown where you spend 40 hours a week, can you claim that you have an office in your home that qualifies as a principal office if you spend only 12 hours a week working in the home office? If you said no, you are not alone. But you would also be wrong.

With the administrative or management rule, you can have your principal office in your home with 12 hours of work even when you work at your other office for 40 hours.

If you would like to discuss how this might work to your benefit, please contact us.

Related Newsletter: 14 Tax Reduction Strategies for the Self-Employed

 

SERVICES WE OFFER RELATED TO THIS TOPIC

The information contained in this post is for general use and educational purposes only.  However, we do offer specific services to our clients to help them implement the strategies mentioned above.  For specific information and to determine if these services may be a good fit for you, please select any of the services listed below. 

4x4 Financial Independence Plan

The Smart Tax Planning System
for Business Owners ˢᵐ

4x4 Financial Independence Plan

The Smart Tax Minimizer ˢᵐ (for Consumer and Home-Based Businesses)

For more information on tax planning, visit our Tax Planning page to see our list of services.

 

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