Thursday, February 14, 2008

Husband & Wife are Not Sharing Their Home Office

June --

I’m just finishing up your book, Self-Employed Tax Solutions, and I’ve enjoyed it immensely. Thanks for putting all this gobbly-gook into something normal people can comprehend!

I’m still confused by the home office rules. (Who isn’t?!)

Here’s my situation: I am an independent software developer, working most days from our home in Shoreview, MN. I've been an independent since 2003. My husband is also an independent (he’s a technology strategy consultant - he went independent last year). Typically he does not work from home, although occasionally he does. We have a large office, and while there isn't a wall between us, the room is clearly bifurcated between his “space” and mine. (Mine has carpeting and his does not. We have completely separate desks, etc.)

In the book, you note that both “Victor Visual” and his wife share the studio, and thus can’t claim the deduction because neither has exclusive use. But then later on, you note that a business area doesn't have to be an entire room.

I’m wondering if I can take the deduction for my section of the office (and perhaps the area where I house my server rack and printers, in the room next door.) I assume that we cannot both take the deduction – him for his half and me for mine (then again, since our businesses are separate, perhaps that is okay, too?)

Note: I did read the items on the blog under husband-wife business and home office, so if I missed the answer, I am sorry.

Thanks, Avonelle from
Shoreview, MN


Hello Avonelle,

Thanks for your generous comment on my book. I think indies are normal people. It's the rest of the work that's got it off-center!


It's important to understand that a home office does not need to be an entire room. It just needs to be an area of your home, apartment, even houseboat, that is used exclusively for your business.

An aside ... sometimes exclusive use is not required, for instance, for day care and inventory storage.

So, if you use half the room for your business and your husband uses the other half for his business, then you each get a deduction for your share of the room in relation to the total size of your home.

Here's another way to visualize it: Were you to have a 2000 square foot apartment and your area were the extra bedroom, 10 feet by 20 feet, then your home office is 200 square feet or 10% of your apartment. If your husband used a 10 by 10 area of the den for his desk and bookshelf then his 100 square feet equal 5% of the apartment.

You may take 10% of the costs of running your apartment as a business expense. He may take 5%.

Were you both to work in the same space for two different businesses, then neither of you would have exclusive use and so neither of you would get a home office deduction.

Best,
June

2 comments:

June Walker said...

June – I just saw your response. Thanks so much! I was feeling bad that perhaps the answer was there on your blog and I just wasn’t seeing it!

I’m so happy that your interpretation fits with mine. Now we’ll see what happens when I start talking with some tax preparation folks.

I’m looking forward to digging more deeply into the information you have put together on selecting the right tax preparer. I spoke with someone today I think might be a good fit for us, but I want to probe more to make sure they have a good understanding of the life of an indie.

Thanks again! You’ve really brightened my day!

Avonelle Lovhaug
Code Poetry: Affordable Software Masterpieces

www.avonellelovhaug.com

Avonelle Lovhaug said...

Do you feel like sometimes your posts are “stating the obvious”?

On my site I write about software development projects for business people who may not have experience with this. Recently, I posted about selecting someone with The Right Stuff to create your software:

"All developers have a wide variety of experience, and not all of it will be applicable to your job. The task of creating an operating system is very different from creating an application like Microsoft Word, and that task is different from creating a marketing website. While you are unlikely to find someone who has built an application exactly like your proposed project, you can ask some questions to narrow your search..."

In a way, this is really just common sense. But I think technology puts non-technologists off such that they can’t see the common sense things. You probably see that too in your business – people get so nervous and confused by the IRS and the tax code that even when things make sense we question if we really understand the rule!