Mileage

[taxea]

I believe the judge in Bogue (the TCM case cited in a prior post) agrees with your conclusions.

He writes:Petitioner also argues that his use of the storage shed exclusively for business entitles him to deduct his commuting expenses. Although deductions are allowed for separate structures used in connection with the taxpayer’s business, pursuant to section 280A(c)(1)(C), the use of such separate structures for business does not qualify the taxpayer’s residence as his principal place of business. The term “principal place of business” is set forth in section 280A(c)(1)(A) and the flush language following section 280A(c)(1)(C) that, by its terms, clarifies only section 280(c)(1)(A). Accordingly, petitioner’s exclusive use of his storage shed does not make his residence his principal place of business.

If all he does is store business related items on his property and does not do administrative work then the storage area is just that. I don't see a deduction without an OIH. If he stores business items in a storage facility and pays rent for the area then he can expense the rent as business related.

[smithtax]

We have beat this subject to death

The IRC AND TCM has spoken very clearly, and contrary to obvious personal opinions, we must acquiesce to higher authority and apply applicable law relating to this issue.

No deduction allowed.

[Roberts]

To deduct mileage you need a principal place of business.
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Your home office will qualify as your principal place of business if you meet the following requirements.

You use it exclusively and regularly for administrative or management activities of your trade or business.

You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
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Having supplies in a garage would not make that area part of the OIH. Storing inventory in it would.

For the OP we are talking tools that are a requirement of the job itself.

[New York Enrolled Agent]

I've been doing a little more reading on this.

I believe the judge in Bogue (the TCM case cited in a prior post) agrees with your conclusions.

He writes:Petitioner also argues that his use of the storage shed exclusively for business entitles him to deduct his commuting expenses. Although deductions are allowed for separate structures used in connection with the taxpayer’s business, pursuant to section 280A(c)(1)(C), the use of such separate structures for business does not qualify the taxpayer’s residence as his principal place of business. The term “principal place of business” is set forth in section 280A(c)(1)(A) and the flush language following section 280A(c)(1)(C) that, by its terms, clarifies only section 280(c)(1)(A). Accordingly, petitioner’s exclusive use of his storage shed does not make his residence his principal place of business.

[geekgirldany]

To deduct mileage you need a principal place of business.
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Your home office will qualify as your principal place of business if you meet the following requirements.

You use it exclusively and regularly for administrative or management activities of your trade or business.

You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
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Having supplies in a garage would not make that area part of the OIH. Storing inventory in it would.

[taxea]

Let me get this straight.

If t/p has an exclusive space for storage, which will allow him to claim OIH, then the office inside the home used for business does not need to be exclusively for business for the purpose of claiming mileage? This is under the assumption that he does all administrative work at home but the space is not exclusively used for business as the storage is.

The OIH does not have to consist of a full room. A desk from which administrative work for the business is done is sufficient to call it a home office. If supplies are stored in a garage cabinet, then that area is also considered as part of the OIH. One can take mileage without having a home office. If he rents a desk in a business office away from his home the mileage to and from his home to this office is considered commute. All other mileage for business purposes is deductible. If he has office space at home then all mileage for business purposes is deductible.

Does that help?
taxea@hawaii.rr.com

[geekgirldany]

I've been doing a little more reading on this.

To qualify to deduct expenses for business use of your home, you must use part of your home:

Exclusively and regularly as your principal place of business,

Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business,

In the case of a separate structure which is not attached to your home, in connection with your trade or business,

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So I originally said a place to store tools would allow you to have the mileage deduction. I believe I am incorrect because of the above tests. Plus consider the following from Pub 587:

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Storage of inventory or product samples. If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. However, you must meet all the following tests.

You sell products at wholesale or retail as your trade or business.

You keep the inventory or product samples in your home for use in your trade or business.

Your home is the only fixed location of your trade or business.

You use the storage space on a regular basis.

The space you use is a separately identifiable space suitable for storage.

Example.

Your home is the only fixed location of your business of selling mechanics' tools at retail. You regularly use half of your basement for storage of inventory and product samples. You sometimes use the area for personal purposes. The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business.

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So storing tools in the garage won't pass. You have to actually meet all the tests for the "Storage of Inventory/Product Samples". If you are not in retail then that is nixed. It says this for separate structures:
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Separate Structure

You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers.


Throwing some tools in the garage does not count. A separate structure could count if there is an office in it. You need to be doing some type of administrative work or seeing clients for it to be a principal place of business. No principal place of business then no mileage deduction.

I've never had this come up when preparing a return. All my clients have an office in their home in a separate room. Some will store inventory in their garage and I don't remember ever taking a deduction for someone storing tools in their garage.

[joanmcq]

Oops, you are correct, my bad. I wasn't considering that the per mile amount includes depreciation whether or not you are still taking it. Guess I was having a brain freeze. When depreciation is done you can only take vehicle expenses.

I wish the vehicle expense didn't force us to do it both ways. If depreciation was taken in the first year, having to fill in all the required mileage info and answer the questions is totally a waste of time. If intention is not to take mileage we should only have to input total and business miles to get to the % of actual expenses we are inputting. The rest of it should only be required if taking mileage. One question on the return, itself, would solve this problem. I am capable of figuring the mileage on a calculator to compare it with actual expenses. If the Tp has a choice of both options.

This is a worksheet...does anyone know of any reason why it couldn't be done the way I suggested? I sure would like to suggest that my software developers consider changing the form.

You have to use standard in the first year AND use straight line depreciation. No MACRS.

[Gretel]

Roberts

Let me get this straight.

If t/p has an exclusive space for storage, which will allow him to claim OIH, then the office inside the home used for business does not need to be exclusively for business for the purpose of claiming mileage? This is under the assumption that he does all administrative work at home but the space is not exclusively used for business as the storage is.

[Roberts]

How would a storage area only, exclusively used for business, make the home the principle place of business ? OIH deduction yes, but the OP is about mileage. Maybe I misunderstand?

You have to prove you have a principal place of business. Is he doing bookkeeping in his home? Most likely. Scheduling client visits? Most likely. If he's storing his equipment in the home, he's also likely repairing and servicing the equipment in the home. IMO, that's a principal place of business. A carpenter will have daily repairs and maintenance for equipment. If he rented a garage / office to do all those things right down the street from his house, it would be a normal and accepted principal place of business.

[ddoshan]

I also question / wonder about the storage of equipment or whatever as being a qualified reason that a taxpayer may be allowed mileage from home. I could be wrong, but it was my understanding that in order to be able to deduct the mileage your home must qualify as your principal place of business with regular and exclusive use and not just because you happen to store some equipment or supplies or whatever.
Note... I don't think you have to actually take or use the office in the home deduction on the tax return to meet the test. Although this may be debateable. But you still have to meet the regular and exclusive use test as your principal place of business.

[Gretel]

How would a storage area only, exclusively used for business, make the home the principle place of business ? OIH deduction yes, but the OP is about mileage. Maybe I misunderstand?

[Roberts]

"The exclusive use test is met with respect to a portion of the taxpayer's home only if there is no use of that portion of the home at any time during the tax year other than for business purposes."

Given the above it is my opinion that he must have an office in home or be using an area to store tools and use that area exclusively to claim the mileage. There has to be a room that is only used for an office. It can not be mixed use.

If the contractor is storing equipment in his garage or basement, it meets the use test. The office use space doesn't have to be within the living space of the home or a room within the house. A cabinet in the front of his garage used to store tools for his business would qualify as his office.

[Roberts]

Where does the TP store his tools and equipment?

Bingo. Garage storage of literature, samples or equipment is qualified space for the home office deduction. Just because you don't take the home office deduction doesn't mean it isn't an approved space. If he stores his equipment in a bunch of cabinets lining the walls of his garage it may only be 75 square feet of a 3,500 sq/ft home so the deduction isn't going to be significantly beneficial so they may not waste their time with it. At the same time it still is qualified space.

[geekgirldany]

"The exclusive use test is met with respect to a portion of the taxpayer's home only if there is no use of that portion of the home at any time during the tax year other than for business purposes."

"If a taxpayer's residence is the taxpayer's principal place of business within the meaning of Code Sec. 280A(c)(1)(A), the taxpayer may deduct daily transportation expenses incurred in going between the residence and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance (Rev. Rul. 99-7; Bogue v. Comm'r, T.C. Memo. 2011-164)."

"Section 280A(c)(1)(A) provides, in part, that a taxpayer may deduct expenses for the business use of the portion of the taxpayer's personal residence that is exclusively used on a regular basis as the principal place of business for any trade or business of the taxpayer."

Given the above it is my opinion that he must have an office in home and use that area exclusively to claim the mileage. There has to be a room that is only used for an office. It can not be mixed use.