Home based entrepreneurs and work at home telecommuters who want to deduct unreimbursed expenses have gotten a tax break … if they live in the United States that is.
From Smart Strategies
The home office deduction has been greatly expanded by the courts. No longer do you have to use your home office space exclusively for business. In the W. Hairston case the court allowed a deduction for proportionate use of the space. That will make it easier to take deductions, and it will also make it harder to take away deductions on audit. The broom in the closet will not matter any longer.
This is how I conceive it working. If you use your living room 40% of the time for business use and 60% for personal use, you can deduct as a business deduction, 40% of the cost associated with that space.
And let’s expand it to different rooms. Let’s say you use your powder room 35% for business, your spare bedroom, 85% for business, your living room 40% for business, your pool 85%, and your small office 100%, they could all be deductible according to the W. Hairston case.
The case was well reasoned and cited section 162 as its justification. I believe it will hold up. And, apparently, so does the author of the article I read in “Taxes, The Tax Magazine.” Speaking of exclusivity as prior law, he said, “The standard has been relaxed.” He went on to say, “The Hairston court case looked to actual usage.”
Of course I am not dispensing tax advice. Neither is the author of the article. And you should not take it that way. We are just reporting developments. You should consult with your own tax advisor. Your particular circumstances may vary, or your tax accountant may not feel comfortable with this approach.
HT to Small Biz Survival