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If you are self employed and perform services a the homes or workplaces of customers or clients, you may not have a fixed place of business.

Strategy: Do all your administrative  at home. Even though you are working primarily at numerous other locations, you may qualify for home office deductions. The tax rules in this area were codified after a landmark Supreme Court cas. Soliman 506 US 168.

Generally you are eligible for a home office deduction only if your home is your principal place of business or where you meet or deal with customers, client or patients in the normal course of business. The deduction is based on the portion of the home used exclusively for business purposes. Suppose you own a carpentry or consulting business where you work at different business location virtually every day. In this case, it is harder to establish where your principal place of business is located.  The Supreme Court case involved Dr Soliman, an anesthesiologist who performed services in three hospitals for about 30 to 35 hours a week. He did not have an office in any of the hospital. Soliman's only office was a room in his condominium.  He worked there two to three hours a day on administrative matters; contacting patients, surgeons, and hospitals by telephone; maintaining billing records and patient logs; preparing for treatmentss and presentations and so on. Soliman did not see any patients at his office 

The Supreme Court required a comparison of all the locations where work is performed to see which one is the most important to the business. Each case was to be decided on its own merits. While the top court said that no one factor is necessarily determinative, great weight was given to where  the goods and services of the businesses were delivered. The 1997 tax law effectively repealed this arbitrary standard and added a new standard, your home office qualifies as a principal place of business if:

  1. You use the home office to conduct administrative or management activities of your trade or business
  2. The trade or business has no other fixed location where you conduct substantial administrative or management activities 

Furthermore, a deduction is allowed only if the office is exclusively used on  a regular basis as a place of business. If you are an employee, the exclusive use must be for the convenience of your employer. In essenc, the tax law now recognized administrative management services as a valuable component of the :principal place of business" test.  This benefits self employed individuals from all walks of life


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Daniel Cullinane CPA

25 Plaza 5 25th fl Jersey City NJ                                          phone 732-516-1648 fax 732-516-9778

MBA Taxation

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION