Home office and vehicle use

[appelman]

A client runs a beauty salon. She has no place in the salon to do her paperwork, so she does all her administrative work and bookkeeping from a small office in her home. I believe this qualifies her to take a home office expense deduction. However, she also asks about car usage for travel between the home office and the salon. My take is that this would be non-deductible commuting expense. Am I right?

[Snaggletooth]

Right on Both Stands

Appleman, I think yes and yes.

IRS has somewhat relaxed home office requirements that customers meet at the office, and allows necessary reasons to have a home office, but still requires that it be dedicated space.

Driving to the salon is absolutely commuting. If she wants to log mileage for work IN ADDITION to the salon, that would work. Examples could be driving to another location to pick up supplies, banking, cosmetology for shut-ins, etc.

[AZ-Tax]

Same Situation but Salon is S-Corp?

Same Situation but Salon owner is single shareholder (SS) of S-Corp and has her or his own clients plus the S-Corp pay her or him a salary. Can the S-Corp reimburse the SS for their Salon related office space in their home?

[John of PA]

What if her day starts at the office in the home doing paperwork, planning the day, perhaps some phone calls, etc.; or stoping by the bank on the way to the Salon; Then the drive to the Salon would not be commuting to work.

[ChEAr$]

What if her day starts at the office in the home doing paperwork, planning the day, perhaps some phone calls, etc.; or stoping by the bank on the way to the Salon; Then the drive to the Salon would not be commuting to work.

Keep in mind that the salon itself is the principal place of business. The "home office" is merely for her convenience.

[Kram BergGold]

Driving is deductible

I assume taxpayer is self employed.
The taxpayer is allowed to claim home office as this is where she does the administrative work for her business (I am assumin gshe has a space used reularly and exclusively). Once home office is allowed there is no commuting and driving from home to the store is deductible. How is this different from a plumber. The plumber has a home office from which he does bids and billing. Once he has this all driving is deductible. This has been true since the IRS changed the rules maybe 10 years ago.

[Gary2]

Keep in mind that the salon itself is the principal place of business. The "home office" is merely for her convenience.

The convenience part isn't relevant for a self-employed individual. Pub. 587 makes that clear, with the infamous anesthesiologist example.

It is somewhat ambiguous about the "principal place of business" test. It begins by referring to the relative important and time, which would lean towards the salon being the principal place, but then narrows it down by specifying that the home office will qualify if it used for "administrative or management activities" and no other fixed location is used for substantial administrative or management activities. But it never includes "supervising others" or similar as examples of a management activity. True, many salons don't have employees; they lease out the chairs to independent contractors. Still, it leaves me wondering.

[ddoshan]

In my opinion the mileage from legitimate home office to salon is deductible.

[FEDUKE404]

My thoughts

The convenience part isn't relevant for a self-employed individual. Pub. 587 makes that clear, with the infamous anesthesiologist example.

It is somewhat ambiguous about the "principal place of business" test. It begins by referring to the relative important and time, which would lean towards the salon being the principal place, but then narrows it down by specifying that the home office will qualify if it used for "administrative or management activities" and no other fixed location is used for substantial administrative or management activities. But it never includes "supervising others" or similar as examples of a management activity. True, many salons don't have employees; they lease out the chairs to independent contractors. Still, it leaves me wondering.

Perhaps, but I see this entire issue as a thinly veiled attempt to deduct what most people would view as daily commuting expenses to a fixed work location.

That is an entirely different scenario from a plumber who visits different locations each day.

I've encountered "employees" who would use a similar ruse by stopping at a neighborhood ATM to deposit a payment, then after their "first business stop" deduct commuting the remaining 40 miles to their office work location. Repeat the process on the way home (stop by the laundry to get some dry-cleaning) and the circle is complete. NO commuting, virtually all "business" mileage!

It basically boils down to how much you wish to push your luck. I personally see nothing but non-deductible commuting expenses for the hair stylist. Let's get real: How much "office space" / "office work" is critical to performing her job???? And does she really "work out of her home" ??

FE

[ddoshan]

Perhaps, but I see this entire issue as a thinly veiled attempt to deduct what most people would view as daily commuting expenses to a fixed work location.

May not be fair but I believe it is a benefit the tax code, pubs and regs appear to allow. Too lazy to look things up for the umpteeth time. And to old to remember all I have read and studied in the past on this.

[Gary2]

Perhaps, but I see this entire issue as a thinly veiled attempt to deduct what most people would view as daily commuting expenses to a fixed work location.

That is an entirely different scenario from a plumber who visits different locations each day.

I've encountered "employees" who would use a similar ruse by stopping at a neighborhood ATM to deposit a payment, then after their "first business stop" deduct commuting the remaining 40 miles to their office work location. Repeat the process on the way home (stop by the laundry to get some dry-cleaning) and the circle is complete. NO commuting, virtually all "business" mileage!

It basically boils down to how much you wish to push your luck. I personally see nothing but non-deductible commuting expenses for the hair stylist. Let's get real: How much "office space" / "office work" is critical to performing her job???? And does she really "work out of her home" ??

I don't see it as veiled, I see it as a totally open use of the tax code to deduct what's allowed. That most people might view it as daily commuting expenses isn't really relevant, just like most people's views concerning dependency (I support my 25 year old who only made $4K last year, of course he's my dependent), etc. don't change the law.

Now if you're suspicious about whether the home office qualifies in the first place, that's another story. But it's inconsistent and flawed to first agree that a person is entitled to the home office deduction and then disagree about deducting mileage from the home office to other business locations. There's simply no way to argue one without the other.

[FEDUKE404]

All rightie

Now if you're suspicious about whether the home office qualifies in the first place, that's another story. But it's inconsistent and flawed to first agree that a person is entitled to the home office deduction and then disagree about deducting mileage from the home office to other business locations. There's simply no way to argue one without the other.

OK....from the facts presented I would have a hard time justifying a "home office" for a hair stylist with a separate, regular place of (self)employment.

And that goes without even adequately addressing the "regular and exclusive use" rules for any OIH.

Memo to self: Why did I bother to respond to anything on these boards?? Thought I had learned my lesson several weeks ago. . . . .

FE

[appelman]

Gary and the IRS have just about convinced me!

I am coming around to Gary's position, based on the following paragraphs:

From Pub. 463:
"Office in the home. If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)"

And from Pub. 587:
"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."

and further from Pub. 587:

"Administrative or management activities performed at other locations. The following activities performed by you or others will not disqualify your home office from being your principal place of business...
You occasionally conduct minimal administrative or management activities at a fixed location outside your home.
You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home.)
You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead."

[Will]

I don't see it as veiled, I see it as a totally open use of the tax code to deduct what's allowed. That most people might view it as daily commuting expenses isn't really relevant, just like most people's views concerning dependency (I support my 25 year old who only made $4K last year, of course he's my dependent), etc. don't change the law.

Now if you're suspicious about whether the home office qualifies in the first place, that's another story. But it's inconsistent and flawed to first agree that a person is entitled to the home office deduction and then disagree about deducting mileage from the home office to other business locations. There's simply no way to argue one without the other.

Absolutely agree. If it's a valid home office, the mileage is deductible. If not, it's commuting. So the debate should be whether it qualifies as a home office, not whether it's commuting.

[oceanlovin'ea]

A-Z Tax

I believe that if the s corporation decides to reimburse shareholder/employee for expenses and the appropriate minutes are recorded, it would be perfectly acceptable for the s corp to reimburse her for use of space in her home as well as mileage expenses.

Linda, EA