Legal Way to Deduct Home Office for Your Corporation

May 1st, 2022 at 12:09 PM

Here\'s the 2 boilerplate explanations IRS agents use to deny home office deductions:

1. IRS has disallowed your deductions for office-in-the-home expense because you have not established that is was for the convenience of your employer. Voluntary, vocational, or incidental use of part of your home in connection with your employment does not entitle you to a business deduction.

2. If you rent all or part of your residence to your employer and use the rented portion when performing services for the employer, you cannot deduct home office expenses.

Here\'s how to legally deduct home office for your corporation:

• make your corporation write you a letter stating that you must find office space and that space may be in your home.
• have your corporation reimburse your home office expenses to you as an employee business expense
• do not rent the office in your home to your corporation
• do not report reimbursed employee expenses as taxable income

In addition, make sure you submit proof to your corporation that supports the deduction--for example:

• receipts for the expenses
• photos that show the office is set up for exclusive business use
• for a sample period, say 90 days, documenting the use of the office for more than 10 hours a week

Also, complete IRS form 8829 --showing your home-office expenses for the year. I recommend attaching this form to the corporate reimbursements, further documenting the office-in-home deduction.

Mark S. Fineberg, CPA