Another Big Advantage Of Your Home Office-Commuting Expenses

July 13th, 2014 at 9:11 AM

You may deduct home office expenses if you meet these tests:

1. Principal place of business. If you use your home office, exclusively and on a regular basis, as your principal place of business. Furthermore, the home office must satisfy either the “management and administrative” test or the “relative importance” test. This definition is a bit too detailed for this brief article.
2. Home Office used for meeting patients, clients, or customers. Another test is that you need to meet or deal with patients, clients, or customers on a regular basis.
3. Separate structures. Also, your home office must be located in a separate unattached structure on the same property as your home-for example an unattached garage, or workshop.

Now to the commuting expenses. Once you qualify for the home office deduction, you are entitled to also deduct your commuting expenses, the daily travel between home and another work location in the same business, regardless of distance or whether the location is temporary or regular. You still must substantiate the auto expenses through adequate records such as a log or diary. In essence, you must be able to prove this business mileage in accordance with IRS Code Section 274.

If you operate as an S-Corporation or a C-Corporation, you can treat the reimbursement as travel and not report the reimbursement as income. However, make sure to maintain an “accountable plan”; one the requires you to substantiate the expense, and reimburse for only deductible business expenses.

This is only a short briefing, as the details to these tax strategies are much more detailed and complex to discuss here. The point is to be aware that that there are several tax reduction techniques to reduce your Federal Income Tax, Social Security & Medicare, State, City, and Local Taxes.