Home office in Studio Apartment

[LCP]

Taxpayer has no other office and works full time at home remotely by computer. The potential deduction is significant as he lives in Manhattan.

Can he qualify for a home office without having a separate room used exclusively as an office?

[ATSMAN]

Taxpayer has no other office and works full time at home remotely by computer. The potential deduction is significant as he lives in Manhattan.

Can he qualify for a home office without having a separate room used exclusively as an office?

Unfortunately there is no exception to the separate and exclusive rule. I have a friend who lived in Gold st, Manhattan in a 300 sq. feet one room apartment. Could not do it!

[kathyc2]

I don't believe it needs to be a separate room, just a separate area such as a corner of a room.

[taxmom34]

is he an employee or self employed?

[TAXNJ]

Irs

Taxpayer has no other office and works full time at home remotely by computer. The potential deduction is significant as he lives in Manhattan.

Can he qualify for a home office without having a separate room used exclusively as an office?

Also, for your info, the IRS had given a seminar specifically on this topic.

1 - you can try to access their archived seminars on this topic
Or

2 - it is covered in IRS topics on their site

Then you will be able to apply your specific situation. Let us know your result

[ATSMAN]

I don't believe it needs to be a separate room, just a separate area such as a corner of a room.

You are correct but that separate area must be exclusively used for business. No sharing of the dining room, den etc.

It may fly under the radar if the taxpayer used the simplified method ($5/sq.ft). But if they do actual expenses (considering NYC rents and utilities), it may stick out like a sore finger.

[kathyc2]

You are correct but that separate area must be exclusively used for business. No sharing of the dining room, den etc.

It may fly under the radar if the taxpayer used the simplified method ($5/sq.ft). But if they do actual expenses (considering NYC rents and utilities), it may stick out like a sore finger.

Of course all other requirements would need to be met, but IMO not being a separate room would not automatically disqualify. In some circumstances qualifying as HO for starting travel point has more benefit than the actual HO deduction.

[TAXNJ]

Let us know

If you have not looked already, here is some info to apply to your scenario to take the guessing out of the picture and you have some info to reference. See link below paragraphs.

"Exclusive Use"

To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition.

You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes.

Example.

You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Your family also uses the den for recreation. The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den.

"Exceptions to Exclusive Use

You do not have to meet the exclusive use test if either of the following applies.

You use part of your home for the storage of inventory or product samples (discussed next).

You use part of your home as a daycare facility, discussed later under Daycare Facility ."

SEE LINK BELOW:

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

Let us know

[Roberts]

JMO but if it's a small studio apartment (not a loft), it's going to be difficult to justify that a portion of 450 square feet is set apart exclusively for work if there is an audit. I had a continuing education course in 2005 where an IRS agent spoke about this. He said the IRS' position was that if you are trying to declare a portion of a regular use bedroom as your home office - it will be denied. For example if you declare the desk at the end of YOUR bed is your home office - nope. The desk in the guest bedroom - perfectly fine.

Had a golf buddy who was audited and his wife tried to declare that the kid's bedroom closet had been turned into their home office desk. All was fine until they admitted the kid stayed with them every Saturday night in that room. The IRS rejected it as saying that was the kid's active use bedroom and not an exclusive use office.

[AZUKHiker]

Miller v. Comm'r, T.C. Summary 2014-74

Have a read of Miller v. Comm'r, T.C. Summary 2014-74. If the circumstances are right you can claim use of home for part of a small apartment.

Taxpayer has no other office and works full time at home remotely by computer. The potential deduction is significant as he lives in Manhattan.

Can he qualify for a home office without having a separate room used exclusively as an office?

[TAXNJ]

Good find

Have a read of Miller v. Comm'r, T.C. Summary 2014-74. If the circumstances are right you can claim use of home for part of a small apartment.

Good find. Question for you on this T.C. you reference.

The summary opinion states in part "Persuant to code Section 7463(b), this opinion may not be treated as precedent for any other case..."

Are you saying this may be used as a precedent?

Thanks

[Bees Knees]

The summary opinion states in part "Persuant to code Section 7463(b), this opinion may not be treated as precedent for any other case..."

Are you saying this may be used as a precedent?

A summary opinion cannot be used as precedent, meaning if you go to court, you can't use this case as a citation to support your position. But a summary opinion is a good indicator of how the tax court may rule in your case if you have similar circumstances.

Of course each case is different, and the tax court often contradicts itself on the finer details. There were a number of similar cases in the last couple years where the taxpayer tried to deduct a portion of his RV used for business. The Tax Court said the RV is so small in total size that it would be impossible for a portion of it to meet the exclusive use test. Each case depends on the facts, but the smaller the home, the harder it is to meet the exclusive use test, particularly if you have to pass through the area to get to another personal use area of the home. Thus, if that desk in the corner used for business is in the middle of the path to get to the bathroom, you can't meet the exclusive use test. But if it is in a corner that is never used other than when siting at the desk to work, it has a chance of meeting the exclusive use test.

[Bees Knees]

I think the other problem with deducting an area that is not partitioned off has to do with little minor personal use issues. If you have a separate room, the door can be closed and off limits when not in use. But if you say the desk in the corner on the far side of the living room is your office, it is easy for minor little things to disqualify it. For one thing, if your home is so small that you can't have a separate partitioned space for business, where are you going to pay your personal bills? If that desk is the only desk in the apartment, then more than likely you occasionally will use it to write out the check for the electric bill. You are likely not going to walk over to the kitchen table just to pay personal bills when you have a desk siting there in the corner with all your pens and paper and drawers to keep your stamps. What if you have a cat, and the cat jumps up on the desk to sleep when you are not using it? You just lost your claim that it is exclusively being used for business. Thus, I think when push comes to shove, the IRS is going to win the argument in court when you try to claim that desk in the corner is being used exclusively for business.

[TAXNJ]

Well said

A summary opinion cannot be used as precedent, meaning if you go to court, you can't use this case as a citation to support your position. But a summary opinion is a good indicator of how the tax court may rule in your case if you have similar circumstances.

Of course each case is different, and the tax court often contradicts itself on the finer details. There were a number of similar cases in the last couple years where the taxpayer tried to deduct a portion of his RV used for business. The Tax Court said the RV is so small in total size that it would be impossible for a portion of it to meet the exclusive use test. Each case depends on the facts, but the smaller the home, the harder it is to meet the exclusive use test, particularly if you have to pass through the area to get to another personal use area of the home. Thus, if that desk in the corner used for business is in the middle of the path to get to the bathroom, you can't meet the exclusive use test. But if it is in a corner that is never used other than when siting at the desk to work, it has a chance of meeting the exclusive use test.

Well said of the summary opinion statement and your summary of the post. Hopefully the Original Poster has something to work with, in addition to their own resource.

Thanks

[taxea]

JMO but if it's a small studio apartment (not a loft), it's going to be difficult to justify that a portion of 450 square feet is set apart exclusively for work if there is an audit. I had a continuing education course in 2005 where an IRS agent spoke about this. He said the IRS' position was that if you are trying to declare a portion of a regular use bedroom as your home office - it will be denied. For example if you declare the desk at the end of YOUR bed is your home office - nope. The desk in the guest bedroom - perfectly fine.

Had a golf buddy who was audited and his wife tried to declare that the kid's bedroom closet had been turned into their home office desk. All was fine until they admitted the kid stayed with them every Saturday night in that room. The IRS rejected it as saying that was the kid's active use bedroom and not an exclusive use office.

if the 450 sqft is in the kids room and not used by them when they are in residence then it qualifies. you can''t take the entire room only allocate the portion used exclusively as an office..