OIH Safe Harbor Trap?

[TaxGuyBill]

There is no doubt that what you posted is contained in the Rev Proc but is it taken out of context? Just asking?

It seems the 15 day rule is applicable under special circumstances that are indicated at the beginning of the section where your quote appears:

... a taxpayer with a qualified business use of a home for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year), or a taxpayer who changes the square footage for a qualified business use of a home during the taxable year (for example, an increase or decrease in the square footage), ...

I believe the 15 day rule is a limitation for "other than full year" use of an OIH. Look at the example in the same section for an application of the limitation - what do you think?

Hmmm. Good point. I'm not sure.

You are right, I did pull that out of context. I apologize, I might be wrong about the 15 day rule.

I would THINK that the 15 day rule would also apply for if it is used for the ENTIRE "portion" of the year. If they restrict the office based on number of days that is it used for a part-year, why not a full year? That's just my logic, but we all know the IRS isn't necessarily logical. :-) Again, my reading was out of context.

[New York Enrolled Agent]

Rev Proc 2013-13 says "a taxpayer shall only be treated as having a qualified business use of a home in a month in which the taxpayer had 15 or more days of a qualified business use of the home."

There is no doubt that what you posted is contained in the Rev Proc but is it taken out of context? Just asking?

It seems the 15 day rule is applicable under special circumstances that are indicated at the beginning of the section where your quote appears:

... a taxpayer with a qualified business use of a home for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year), or a taxpayer who changes the square footage for a qualified business use of a home during the taxable year (for example, an increase or decrease in the square footage), ...

I believe the 15 day rule is a limitation for "other than full year" use of an OIH. Look at the example in the same section for an application of the limitation - what do you think?

[TaxGuyBill]

I disagree, respectfully.

See TTB 5-14 and 5-16 (left columns). Also, on the web link you provided, is a chart from IRS (from the Rev Pro 2013-13) clearly indicating that regular and exclusive use is the test for home office, unless there is separate structure, home rental, or day care use.

I'm not sure what part you are disagreeing with, but I may have phrased it poorly. The Simplified Option specifically states that the office must be used 15 days a month (and exclusively). The actual expense method only states that it must be used "regularly" (and exclusively, of course) and does not specify how many days defines "regularly".

Rev Proc 2013-13 says "a taxpayer shall only be treated as having a qualified business use of a home in a month in which the taxpayer had 15 or more days of a qualified business use of the home."

[mastertaxguy]

Actually, there is a SLIGHT change for qualifying for the home office. The home office deduction requires "regular" use of the office. For the simplified option, a "qualified" home office must have "15 or more days of a qualified business use" in a month.


Also, when using the safe harbor, depreciation isn't used. That means it doesn't reduce the basis of the home and you won't owe tax on the depreciation when you sell the home.

http://www.irs.gov/Businesses/Small-...fice-Deduction

I disagree, respectfully.

See TTB 5-14 and 5-16 (left columns). Also, on the web link you provided, is a chart from IRS (from the Rev Pro 2013-13) clearly indicating that regular and exclusive use is the test for home office, unless there is separate structure, home rental, or day care use.

[Kram BergGold]

Disagree in 15 Day Rule

The 15 day rule is not a determining factor for regular use. It comes into play when the office is seasonal. If there is regular during 6 months, you can only count a month during which the office was used for at least 15 days.

[AJsTax]

Yes,

If a taxpayer can't itemize, can they still use the mortgage interest and real estate taxes on the OIH?

Linda

They can choose which method to use to claim the OIH. If they have all the information they can use the one most beneficial.

[oceanlovin'ea]

Can't itemize

If a taxpayer can't itemize, can they still use the mortgage interest and real estate taxes on the OIH?

Linda

[TaxGuyBill]

By the way, "safe" harbor refers to the calculated amount for deduction, and is not "safe" for assuming the taxpayer qualifies to even deduct OIH to begin with. The rules for qualifying do not change because taxpayer is using (or not using) the new method.

Actually, there is a SLIGHT change for qualifying for the home office. The home office deduction requires "regular" use of the office. For the simplified option, a "qualified" home office must have "15 or more days of a qualified business use" in a month.


Also, when using the safe harbor, depreciation isn't used. That means it doesn't reduce the basis of the home and you won't owe tax on the depreciation when you sell the home.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Simplified-Option-for-Home-Office-Deduction

[ATSMAN]

If you use the safe harbor method for OIH then property tax and mortgage interest can be deducted in sch A if taxpayer itemizes at 100%. No need to prorate between oih expense and balance to sch A.

[buzzardbreath]

New rules effective this year offer a "safe harbor" based on square footage, without detailing any specific expenses.

If a taxpayer uses this new safe harbor, will they lose a proratum of interest and property taxes otherwise deductible on Schedule A?

By the way, "safe" harbor refers to the calculated amount for deduction, and is not "safe" for assuming the taxpayer qualifies to even deduct OIH to begin with. The rules for qualifying do not change because taxpayer is using (or not using) the new method.