Home Office and the Fiancee'

Dear June,

I don't know whether or not to take the home office deduction. I'm stuck on the "exclusivity" part of the definition. I have a little room in my basement where I have a PC. I use it to administer my business (which includes using the Internet). I certainly pass the "regular use" part of the definition. However, I do go down there to surf the web and check email also.

I talked briefly with a CPA, and he said to go for it, because he didn't think the government would come around, looking into my window to see what I was doing. TECHNICALLY speaking, I do other "little" things in there besides administer my business. Does the IRS come into your office to see what's in it?

What do you think? Should I just forget it, or perhaps do my surfing elsewhere in the house and deduct the home office next year?

Thanks.
Mark from Virginia


Hi Mark,

A lot of tax law isn't as murky as some folks think. There are certain areas -- not many, but some -- where you can apply logic or common sense. So let's see how these same questions would apply to some other part of your life.

I'm stuck on the "exclusivity" part of the definition.
Every once in a while my fiancee dates her old boyfriend. Is this an exclusive relationship?

I certainly pass the "regular use" part of the definition.She sees me most of the time.

TECHNICALLY speaking, I do other "little" things in there besides administer my business.
Technically speaking she's engaged to me so the other guy isn't really important.

Does the IRS come into your office to see what's in it?I wouldn't have even know she dated the other guy, but a friend of mine saw her and told me.

We're talking a few thousand dollars in deductions here.I'm in my 40s and really think it's time to get married.

I talked briefly with a CPA, and he said to go for it, because he didn't think the government would come around, looking into my window to see what I was doing.
My mom is concerned that I'll never get married and she really wants grandkids. And who's to know about the other guy anyway?

Now to answer your question: The office must be exclusively used. The IRS could and does visit home offices, although not unannounced -- unless you fall into the Al Capone category of taxpayer. So, as Al would say: For this year, forget about it.

By the way, inventory storage does not require exclusive use. Also, every indie struggles with answering business and personal email on the same computer. There is no practical way to separate them. I know of no court case dealing with that situation. Were I your tax pro, I would look at the legitimacy of your entire solo business before making a decision on home office.

For more on working from home be sure to read the Home Studio post.

And, as always, read the book that can simplify your tax and financial life, AND save you money!
SELF-EMPLOYED TAX SOLUTIONS .

Cheers,
June