Deductions in a Fifth Wheel

June,

My husband is an Union Electrician and I am a self-employed JAMMON (jack of many – master of none) who works from home with my S-Corp – run solely by myself with the occasional help from a consultant. Due to the lack of construction work in the Indianapolis area (the last 18 months) we recently sold EVERYTHING that we owned, purchased a fifth wheel and will travel the country following work that my husband can obtain with the IBEW (International Brotherhood of Electrical Workers). I will continue to work from the fifth wheel as all I need to operate is a computer and cell phone (I do bookkeeping, graphic design, data analysis, high level admin, etc).

We would like to maximize our write-offs and albeit we don’t have many expenses these days aside from a fifth wheel payment, campground fees, cell phone and internet – we want to maximize.

I will be writing off my cell phone and internet as well as other office supplies and operating expenses, but what about other expenses such as the fifth wheel payment and its maintenance costs? Campground fees?

Mileage for my husband from the fifth wheel to his job site and back? Me from the fifth wheel to my clients and back (provided I am in the same State as my client at the moment),

What about items purchased for the fifth wheel such as storage bins, baskets, lawn chairs, propane, etc?

Any advise you give for the travel employee / traveling small business owner would be greatly appreciated.

My husband has associated with many other traveling electricians who write EVERYTHING off, but our small town accountant isn’t on the same page.

J What can we do? Thanks!
Courtney


Dear Courtney,

Generally I don't advise corporations via my blog, however, since much of what you ask applies to a lot of indies I'll see what I can do here to help you out.

If you live out of your fifth wheel [trailer or camper hooked to your vehicle] you must allocate any deduction for its use the same way you would for any home office -- exclusive use on a regular basis. Read these posts home office or studio . All supplies for the running an maintenance of the fifth wheel would be governed by the home office rules.

Supplies exclusively for your business, such as storage bins, would be 100% deductible.

Since you move around all the time I would allow only mileage from one business location to another. That means if you can establish a home office in the fifth wheel then driving from it to a client would be business miles. Here's some auto expense posts expenses -- auto-transportation .

If you pretty much stay in once place and move only when a job comes up, read these posts for possible deductions temporary worksite .

Hope that helps. And don't write-off "EVERYTHING." That doesn't go over well with the guys at the IRS. And, if you know better they may look at it as fraud.

BTW -- I also hope that your small town accountant had a really good reason to have you complicate your life by forming an S-corp.

Happy Trails!
June

Capital Gains Consequences of Home Office Deduction

June --

My companies HQ are in CA. Software support engineer. I've been fortunate enough to work from a home office since my daughter was 4 weeks old. She used to stand on the back of my chair with her arms wrapped around my neck while I would talk with customers. It doesn't get any better than that.

I've read your information about a home office but what are the consequences of claiming a home office? I heard that the nightmare actually occurs when I go to sell my home.

Can you provide some insight into that?

Thank you.
Paul
Hendersonville, NC


Yes, Paul. I remember those work-at-home-with-small-children days. They were great. I still work from my home.

Before I answer your question I'd like to request of you and other indies: When you say you heard or read something somewhere I would really like to know where you read or heard it. It helps me guide indies if I know whether they got wrong info from Aunt Tillie or a CPA or the yoga teacher's husband who happens to be an attorney.

As I say in my book Self-employed Tax Solutions : "Deducting OFFICE-IN-THE-HOME expense for a residence that you own may have an impact on your the amount of taxes you pay when you sell your home. The impact has been minimized by new regulations regarding depreciation of a home office, and almost always the home office deduction outweighs any capital gains tax it may trigger when the home is sold. Even so, be sure your tax pro takes the sale consequences into consideration when preparing your return."

Since I wrote that the tax regs regarding home office sale have been liberalized even more. Of course, the regs may again change in the other direction. I can say that in all my years of practice every indie client had a tax advantage by deducting home office that was not outweighed by capital gains tax at sale.

Best,
June

Checking; contributions; dining; home storage

Because Ron sent several questions look for my answers after each question.


Hi June,

I initially found you because I was looking for information on business checking online. The fees, beginning at $12 monthly (for the least expensive option) seem unnecessary, and as I have been keeping solid records since beginning my consultancy last year, think I’m going to stick with the personal account for now. Nice to see someone provide a good rationale for what seems a rational choice.
Ron refers to these posts on business checking accounts.

So now I’m writing because I’ve just finished reading your book Self-employed Tax Solutions (terrific – thank you! everyone should follow your New Year’s Eve/Day tip!). I agree. I’ve been tracking all my expenses and incomes meticulously, but you gave me some other good points to think about. Here are some questions I have, based on the book scenarios:

1) My kids’ sports leagues all solicit team sponsorships from local businesses. But in your book, you suggest this might not be a wise write-off for indies. Can you elaborate? Should I not do it? And what about sponsoring the softball team that I play on myself?
A quick overview on charitable contributions made by sole proprietorships -- indies: They are not deductible as business deductions. They are personal deductions. Advertising is deductible. So $100 to your daughter's soccer team -- not deductible. $100 for an advertisement in your son's concert program -- deductible. $500 for hockey uniforms that have the name of your business visible to the public -- deductible.

2) I’m still hung up on the “if you have dinner with your wife …” point, primarily because you’re describing exactly what happens to us: The only real time we get to talk about the business, strategy and planning is when we dine together! Permissible deduction, right?
Dinner with someone with whom you have a personal relationship is deductible only if the reason for the dinner is business. Not that you happen to talk business while at dinner. There must be specific business goals that you work on achieving at dinner: spouse reviews brochure; spouse sketches designs for an ad. Things like that.

3) Currently, I can’t take the home office deduction because we don’t have “exclusive space” to work from. But, we do have some space that is exclusively used for storage of business books, files and materials. Can I claim that area? Yes.

Thank you – RA in L.A.
Ron
Long Beach, Calif.

Is a housesitter a business deduction?

June --

Long-haul truck driver for 25 years: We have finally hired a house sitter for when we are gone trucking. Is the $15 a day we pay her considered a deduction? We get most of advice from our personal accountant.

Patricia


Dear Patricia,

If you are not an employee of your husband or vice versa or you are not a partnership or you do not treat trucking as a joint self-employed business -- allowed in some states -- then not only are expenses for the non-business spouse not deductible, but I would not deduct any cost for the housesitter since the reason the non-business spouse is not there taking care of the house is for personal reasons. [More here on husband-wife business. ]

If you are both in the business and if you have a legitimate deduction for home office and if you have a legitimate house sitter -- not someone you pay in cash who is not claiming the income -- then you may deduct the housesitter costs at the same percent as you deduct home office. Same as you would an alarm system or a housekeeper.

-- June

A home is a home is a home.

Hi June,

First, thank you so much for the list of possible business deductions.

I'm also wondering about taking depreciation on a home office. Since I'm purchasing a condo, can't I take depreciation for the percent of my home devoted to an office? Also, can't I take the same percent applied to mortgage interest paid and to property taxes?

Again, thanks for helping me launch.

Jack


Dear Jack,

Yes, you may take all those deductions. All the regs that apply to a home office apply whether it's a condo, houseboat, free standing home. It doesn't matter, so you get the same deductions. It's explained here on my website Office-in-the-Home Expense .

And, you are welcome. I'm sure the expense list will be of use to you.

Best,
June

Home Office: Neither Reasonable nor Unreasonable.

Hi June,

I'm planning on doing freelance programming from my apartment full time and I'm wondering exactly how much of this I can write off as a home office.

I've got a 1 bedroom with my desk and computer gear in the living room. Can I write off the area of the living room (say 50% of the apt)? What if I also watch TV or have people over in that space?

Am I only allowed to write off the 5% or so that the desk occupies? What if I use the computer for non-programming activities? I guess I am wondering what a reasonable deduction would be...

Thanks.
Mark
Boston, MA


Hello Mark,

For home office use there is no reasonable nor unreasonable.

Either using your home for business fits the regs or it doesn't.

The use must be exclusive. In other words you can do nothing in the home office area other than work. That means no friends in to watch TV, no emailing Mom or your girlfriend from your home office computer [everyone breaks that rule].

The area does not have to be an entire room. It can be a small area of one or more rooms.

Here's a more complete explanation of home office expense.

-- June

Home work area must be used exclusively for your business in order to be deductible.

Hello June,

Thanks for your business expense list.

My husband has a catering business run from home. Our house is his office, manufacturing place and also storage for the business. I remodeled the house to expand the kitchen and total cost is more than $ 200,000. How can I deduct the cost of the remodel?

Thanks.
yamin


Dear Yamin,

You cannot deduct any part of your home that is used for both business and living. The exception is any area used for storage/inventory. That area may be used for both and still be deductible.

Any capital improvements made to a home office or workshop are depreciated over 39 years. That means if you spend $39,000 renovating your home office you get to deduct $1,000 per year.

However, even though you cannot deduct the kitchen because it is used for both business and personal does not exclude your deducting equipment that is used either exclusively for your catering business or for both business and personal. For instance, a $4,000 refrigerator if used 80% for business is a $3,200 business equipment deduction.

If you work with your husband, and he is a sole proprietor then the most tax advantageous business structure is for you to be his employee. You might want to read these posts payroll -- spouse as employee .

Best,
June

Home Office Regular Use

June,

Thank you so much for your eLetter Ways Through the Maze.

Your book has been very helpful. What a blessing. I was reading the section in the book on home business deduction. Under rule #2, Used on a regular basis. What do they consider regular?

I'm asking cause last year I had to leave town on family emergency for a month. Additionally, I do consulting in IT. So, sometimes business is slow, other times busy. But even in slow times, we still have to do administrative tasks, including remote support of clients, maintenance, dealing with issues as they transpire.

Thanks for you perspective on this,
-Adam


Hello Adam,

Thanks for letting me know that my writing is helpful to you.

Sounds to me as if you have a home office. An emergency leave of absence from your home office does not disqualify your deduction; nor does any occasional voluntary leave of absence disqualify the deduction. And if once in a while you leave the office to work wireless by the pool in order to keep an eye on the kids, that doesn't disqualify the home office either.

On the other hand, occasional use does not qualify it as a home office. Here's an example from my book:
Allmost Sargent has a rented studio in town. He also has great light in a back room of his house. The room is always locked and seldom used. Once in a while he brings a potential buyer to his home to look at a painting and he uses the back room for the viewing. This is not regular use and so he cannot deduct the use of that room as a business expense.

Although you didn't ask, just let me mention: were Uncle Sydney to sleep on your home office sofa during his occasional pass through town that would disqualify the room as a home office deduction.

Best,
June

From One Wedding To Another: Deductible mileage

Hi June,

I've found your book, Self-employed Tax Solutions, very helpful in preparing my tax return this year. I have a question I can't seem to figure out from reading your section on Auto Expenses.

I've been an indie wedding photographer for almost 10 years. I've never kept a record of my travel to and from weddings until last year, I put all my weddings and appointments with clients in my computer's calendar. Although I did not write down my mileage at the beginning of the year or the end, since it is easy to use Google maps to tally up the mileage to and from weddings, can I just add them up, multiply by the mileage rate, and deduct them?

Also, since I work at home, is it considered traveling to another work site to do the wedding, and therefore only the first half is deductible, not the coming home?

Thank you so much,
Sharon
Oakland, CA


Hello Sharon,

To tally work mileage, you may use any method that works for you. A calendar and Google maps is perfect. And also remember all your errands, too.

All mileage going to and from any work location is business transportation. That includes going to and from your home office to a wedding for a shoot; from one wedding to another; from home office to the photo supply store and back.

Best,
June

More kids than rooms. Home office still no problem.

Dear June,

I read your Features articles with great interest - you really have a talent of explaining complex things with an easy language and with a good humor. Great job!

About me and my business. I just started my own business a week ago. I am doing my taxes with Liberty Taxes and they promised to help me with my business as well, however I would like to receive list of business expenses that I could save on to be better prepared when the tax time comes.

My profession is software developer. I am an independent contractor. I live in Boston, MA I work 2 week in NJ at client's office and other 2 weeks from home. I drive to NJ and stay there in the hotel for work-week 2 times a month.

According to your articles it should be considered as business trip and I can claim car mileage, lodging and even food (at 100%, not 50% correct?).

I have my office setup at home, but it is a part of a big room and not separated. Can I still claim reasonable part of that room as business expense or not? I keep all my books there, but at other side of the same room is my son's bed - I have more kids than rooms and I need to catch up on rooms :)

Thank you in advance!
Thank you.
Tigran


Hi Tigran,

I will assume that you have more than one client and are really self-employed.

When you travel for business you may deduct all travel expenses, including meals and snacks. Although meals and snacks are 50% deductible, not 100%.

A home office does not have to be an entire room. It can be only a few square feet of any room, as long as it is used exclusively for your business.

There are many posts on this blog abut home office and travel. You might want to take a look at them. See the Topics list on the left.

Good luck on increasing the # of rooms!

Cheers,
June

More on Business Expenses

I sent Christine my complimentary list of business expenses. She received it and here are her questions on business expenses. As most of you know I have a full-time accounting practice which serves wacky, wonderful indies. And so, because it's tax season, I am going to do the quick-answer mode for Christine. I EMBEDDED my response below ... June


Thank you very much.... YOU ARE WELCOME!

I plan on purchasing your book so I can look further into what I may deduct. SMART MOVE.

My main job as a Nurse Practitioner I am employed at a private practice but I also sub-contract for a physician at a local prison and I need to find some deductions for that. UNLESS YOU COMPLETELY SHUT-OFF WORK WHEN YOU ARE NOT AT THE PRISON YOU MUST HAVE SOME DEDUCTIONS. AND WHAT ABOUT TRANSPORTATION WHEN GOING FROM ONE WORK PLACE TO ANOTHER?

I have an office in my house with a computer and furniture that I do my research and continuing education in. WOW! I SEE LOTS OF DEDUCTIONS RIGHT THERE.

My husband keeps telling me that I can not deduct part of that as an expense IF THERE IS AN AREA USED EXCLUSIVELY FOR YOUR WORK THEN YOUR HUSBAND IS WRONG. AND WHERE DID YOU SAY YOUR HUSBAND STUDIED ACCOUNTING? I beg to differ with him, my accountant in the past has not been too much on some deductions but with the sub-contractor part I need to find some deductions. I

also have cleaning ladies that clean my house but also they clean my office how do I deduct that as part of an expense? I guess what I am asking is how I deduct part of the utilities, house payment, insurance or what percentage I guess would be a better question. YOU MAY FIND THE ANSWER IN THESE POSTS home office or studio (25). IF NOT THEN HOME OFFICE DEDUCTION IS COMPLETELY EXPLAINED IN MY BOOK.

Thank you I found that your website was very insightful.

Christine
Elida, OH

Home Office When Sharing the Rent

Hi June,

I'm a graphic designer living in Brooklyn, NY. I entered the indie world last October. I'm very green in the indie world and your book has proven to be quite helpful.

My question concerns deducting home office expenses when living in a rental unit with roommates. How does one determine the total area of his home? In my scenario: • 3 roommates live in a rented apartment, each with their own bedroom. • We share a common space that consists of the living room, kitchen, etc... • I pay a higher portion of the total rent for the largest bedroom, half of which I use exclusively for business. My concern is correctly determining the total area of my home for the IRS form. What I think is fair is: Area of my bedroom + 33% of shared space = Total area of my home Will that fly with the IRS? Do I have to include the entire common area even though the 3 of us pay for it?

Thank you,
Sunil


Dear Sunil,

Your way is fine. It gives you a little bit extra deduction. But more easily understood by an IRS guy whose math may not be top notch is to take the total area of all the common space as well as your room as your total square feet of living space and then take your office area.

More posts on home office are here home office or studio (24) .

-- June

Son Has A Landscaping Business

Happy New Year, Indies!

It is not my policy to answer questions that are unique to one person's situation . I have made an exception here because I think this is a cool Q&A to start off the new year. My answers are in orange.

-- June


Ms. Walker,

Your book has been very helpful to us -- equally understandable by a teen and his OLD, almost 50-yr old dad. Ohmygosh, you think 50 is old!

Our 16-yr old son has mowed lawns for neighbors since he was 10 using the unregistered name "Clean-Cut Landscaping Services" the last four years. To get him started, we trash-picked a lawn mower and had it rebuilt for him. He repaid us and has since purchased all his equipment with cash, grossing $30K last year. Impressive.

He now uses a 8'x12' shed and half our 22'x24' two-story barn garage for his ~20K worth of mowing, leaf collection, snow blowing, mulching, planting, hedge, and tree equipment. His younger brother is now working with him, pulling the 8' bike trailer with equipment that the older one had pulled with his bike before he purchased his commercial riding mowers. A family business is good.

He is home schooled and consistently scores extremely well on standardized tests. His routine is starting his school work at 0530 and finishes at ~1300, with some variation for outside coop classes. With No-Child-Left-Behind as policy in public school the past few years, it's no surprise that home-schooling has been on the rise.

Our questions follow:

1. Can we charge him rent on the shed and garage storage space for his business equipment and he deduct that as a business expense? That would help to compensate us for what is now used solely by him. Yes, if you claim the rent as income.

2. Presumably he could not use such a deduction until he is actually paying us? Correct. That is, we cannot prorate the tax, repair, utility, etc. proportion of business-use of our total living space (house, garage, and shed) described in your book until it is a valid expense to him? You are asking about a home office deduction. You can not take a home office deduction because it is not your business.

3. Can we charge him for the sizable laundry cost required for his business and he deduct that? He currently buys his work clothes and shoes. Think of it this way: Were he to pay a laundry service to clean his clothes he would deduct the expense; the laundry service would claim the amount paid as income. You would need to claim the fee for laundry service as income. Depending on your income and tax bracket it may or may not be a tax advantage to have him pay you.

4. Can he claim as transportation expense the mileage from his garage and shed storage area to those neighbors where he conducts his work? He uses his large, 5' deck riding mower to transport all his equipment. His 50-customer clientele is primarily within a 1-mile radius, but for some jobs he has to make multiple trips to transport all the equipment required for that job. Yes.

5. To avoid withholding social security taxes, to his younger brother, will his brother also need to meet the criteria for a sole proprietorship? I assume that would be the simplest arrangement for the two. It's not a question of simple. His younger brother is his employee.

6. Finally, you mention in your book the option of fully deducting the cost of purchased equipment the year in which it was purchased. Are there any particular requirements that he must meet to do that? That's a tax preparation how-to question regarding depreciation. I do not give tax preparation instruction.

Thank you.
v/r Jonathan (dad) for Abraham (older son) and Moses (younger son)
Glenside, PA
You are welcome. Sounds like you have great kids. Kudos to the parents.
June Walker

House Trailer or Motel

June --

Regarding travel related expenses: cost to operate and maintain a house trailer, would that also include the purchase price of a trailer to use instead of lodging while on a temporary work assignment, or would it have to be depreciated?

Laura
Fort Pierce, FL


Dear Laura,

Assuming you have established that the house trailer -- or part of the house trailer -- is a legitimate business expense then you must depreciate the cost. The procedure is similar to depreciating a home office.

-- June

Home Office Exclusivity & Estimated Taxes

Hello,

I do admin type work for a non-profit. It is very straight forward. I send them an invoice for the time I spend doing various things, and I get a check for that amount. I get a 1099 for my taxes. I don't have expenses really. I don't travel, use up office supplies, etc.

I am finding your website helpful, but wanted clarification on one of the archived topics: Office in the home expense. I use the office in our house to do my work. My children do look at books in the office, but it is because it's the only place the bookcase fits. My husband uses the computer to check email a couple of times a week, but other than that, I am the only one that uses it frequently. Can I claim that? It is where I do my work.

Most - about 95% - of Internet use is me working. Can I claim that?

I just end up sending so much of what I make to the government. I would have to save two or 3 checks to pay the taxes in April. I don't have a steady income, so estimated payments won't work. During the summer I combine a month or two of invoices, just because it barely worked. I hope I am not rambling - sorry!

Any help is appreciated.

Thank you.
Kasey
Fort Worth, TX


Hello Kasey,

For starters, it sounds as if you are really an employee who happens to work at home. The non-profit is your employer.

But let's look at the situation as you describe it.

If your children treat your office as part of their home you may not take the entire room as a home office. You may take only the area of the room that is off-limits to the children. Keep in mind that a home office does not have to be an entire room.

If your husband comes into your office to use your computer then the office is not exclusively used for your business and so it is not a deductible office-in-home expense for you. Since you use the internet 95% for business you would be allowed to deduct 95% of its cost. If you use the computer 95% for business then you may deduct 95% of the cost of the computer.

Since money is tight think of some way for your husband to check his email elsewhere. Of course, if it's a laptop you could bring it into the kitchen for him. Or, see how much a home office would save you in taxes. It might save enough to warrant buying him a really cheap, basic computer just for emailing.

As far as estimated taxes, you might want to try this: Look at last year's tax return. If, for instance, 30% of your income went toward taxes, then, take 30% of every check and put it aside -- into a separate bank account if necessary. Then on estimated payment due dates, pay whatever is in that set-aside-account as your tax payment.

Hope that helps a little.

Best,
June

Home office use must be exclusive.

Hi June,

Thank you for your blog - it has been very helpful for small business owners like us. We have an S Corporation in New York, NY, under which we do a few different things - web design as well as making paper goods. We've had the business for a few years, but I only recently was able to begin working full time on the business.

I have a question about the home office deduction - I am working from home and by my square footage calculations, about 12.5% of our home is fully dedicated to office use.

However, on our tax return this year, our accountant deducted an amount that is equivalent to 25% of our home for the home office. I asked her about it, and she said that she included items other than just the home office (utilities, etc), and said that we are allowed to deduct a percentage of "common areas" for home office use as well (eg, we sometimes use the living room as a staging/drying area for the silk-screen prints that we make). Is this okay to do?

Thank you for your help!
Anna


Hello Anna,

Glad you find my blog useful. Thanks for letting me know.

I like your question. It is seldom that an indie questions her accountant taking too big a deduction.

You accountant is wrong. Your example of the living room is just like the example in my book, Self-employed Tax Solutions . There Lily Legal uses the dining room table to go through her legal briefs. No deduction.

To be eligible for a home office deduction the area must be used exclusively for business.

The only exception is for home day care business and inventory storage.

-- June

If you tax pro has an IRS reg showing something different for an S-corp, please ask her to pass it along.

Home office but no income ...

June --

I am an inventor, an indie 2 years, not inc'd yet.

I am just starting out, i.e. haven't actually made any money yet, but I've spent many hours designing, researching and developing my ideas (one of which I applied for a full patent). If I did not receive income can I deduct home office expenses?

Thanks,
Matthew
Golden, Colorado


Matthew,

As long as you are trying to make money in a business-like way you are a business and you may deduct business expenses. There are restrictions on home office expense. Theoretically you may take it as a deduction, however if you have a loss [more expenses than income] then you may currently deduct only the home office portion of mortgage interest and taxes. All other home office expenses must be carried forward, ready to be deducted when your inventions make you some money.

I assume inc'd means that your are thinking about incorporating. Don't do it until you've read my posts here business entity -- incorporation and here business entity -- LLC .

-- June

Partnership & Home Office

June,

My wife and I started an independent consultant business last year in Fairfax, VA. We file partnership returns and have a home office. In doing our taxes, we were told that home office expenses are supposed to be captured in Schedule E and attached to Form 1040.

However, another advisor also said that we can reimburse home office expenses throughout the tax year through our income distributions and then capture them as other deductions on Form 1065 (the partnership return). This would be easier since we wouldn't have to fill out Schedule E so that is what we did.

Did we do the right thing?

Thanks, Matt


Wrong thing, Matt. A basic, really basic, piece of info on tax prep: If there is income from a partnership you must include that income on a Federal Schedule E. This is another example of why I think indies should not prepare their own tax returns.


Since a partnership is the least tax advantageous entity for a husband and wife business you might want to read some posts here payroll -- spouse as employee or here husband-wife business to learn more.

Partnerships have very specific rules on deductions. If you want to deduct the costs of a home office, although not required, I would suggest writing into the partnership agreement that home office use is expected. Deductions for a home office may be taken on Schedule E only. This will reduce a partner's self-employment income and self-employment tax liability.

You may not take home office expenses on the partnership return. And, do not rent to your partnership. That's a real kettle of worms and maggots!

Best,
June

Hubby in the Office: Not Good

Hi June,

I have been self-employed as a writer and editor since 1991. About half of my income is from travel writing...I'm coauthor of guidebooks to Oregon, Montana, and Utah. In the past, I've always deducted my meals and entertainment when I'm traveling to research these books (which require regular updating) at the 50% level.

But since reading your book, it occurs to me that I could classify them as research and thus claim 100%. What do you think?

Also, about that home office...mine is a small portion of a room that I use all day long for work. Sometimes, after dinner my husband will space out in front of You Tube or check sports scores on the computer in my office space. Does this disqualify me for the home office deduction?

Thanks so much,
Judy
Portland, OR


Hello Judy,

Meals and entertainment while traveling for business are considered meals & entertainment expense and so are deductible at 50%.

If you take a client to a jazz club and discuss business before, during or after the show that's an entertainment expense. What I think you may be confused on is this: If a jazz musician goes to a jazz club to hear a certain saxophonist, that's research or education for the jazz musician, not an entertainment expense. In the same way that your going to a writers' workshop would be a research or study expense.

If your husband spaces out in the portion of the room that you use an an office, then absolutely no home office deduction allowed.

-- June

Houseboat Home Office

June --

I am an Ad Agency New Business Consultant. I've been consulting for 3 months.

My wife and I own a home in Birmingham, AL. I have a houseboat in Nashville, TN.

When I was an employee at an ad agency in Nashville I lived on a houseboat through the week and was back in Birmingham on the weekends.

Since starting my own consultancy, I have two clients in Birmingham and Atlanta. I have another client in Nashville so I’m in Nashville servicing that account two days a week. I have a houseboat there that I use as office space where I spend one to two nights.

I’m registered to vote and my drivers license is in Alabama. I do have space designated on the houseboat for office usage.

Two questions: Can I deduct a portion of the boat as office space? Can I claim residency in Tennessee which has no state income tax?

Your site has been the most helpful resource I've found in working from home. I forwarded your article Designers Dozen: Tax Saving Tips to about two dozen graphic artist that I know along with a link to your blog and website.

Thanks,
Michael

Business Runs Better on a Full Tank

michael gass consulting
Advertising Agency New Business Consultant
(877) 695-7466
michael@michaelgass.com
www.agencynewbiz.blogspot.com
To learn more, please visit www.michaelgass.com


Hello Michael,

Please keep telling colleagues and friends about my blog. Thanks, I appreciate it.

Yes, you may take a deduction for the costs for a home office on your houseboat. Rules apply same as they do to any other type residence.

You may have as many home offices as your indie business needs and you may take the home office deduction for all of them.

Also keep in mind that the cost of getting from one work location to another is a business transportation expense.

And sorry, no, you cannot claim Tennessee as your state of residence. Good try.

Best,
June

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