Home Office-Show Me the Proof

January 27th, 2021 at 3:36 PM

Question. If you have an office outside your personal home—say, downtown—can you have a tax-deductible office inside your home for the same trade or business? 

Answer. Yes. 

1. Who says that?

1. The IRS.

1. Show me where they say that!

In IRS Publication 587, the IRS says this: 

Your home office will qualify as your principal place of business if you meet the following requirements: 

1. You use it exclusively and regularly for administrative or management activities of your trade or business.
2. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

The quote above mirrors the law and the legislative history, as you will see below. Note the following points: 

• The administrative office is a “principal” office.
• You must use this office exclusively for business.
• You must use this office regularly for business.
• You must do your administrative work in your home office.
• You must not do your administrative work in the office outside the home.

Here is a second important quote from IRS Publication 587: 

You can have more than one business location, including your home, for a single trade or business. 

The IRS makes this rule very clear and straightforward: you may have more than one office for your business, including an office in your home. 

Mark S. Fineberg, CPA