claim expense of maintaining a second home used for business

[sdarave]

I have a client who lives in Idaho but maintains a home in Las Vegas exclusively for his personal lodging when he goes there on business for a large insurance company. He travels there about four days per month. what would be the best way to claim those expenses? Home office? form 2106 line 3a? He is careful to only claim the days when he is working at the company office in LV and only rarely goes there for personal reasons.
Your help is greatly appreciated, Thanks!

[TaxGuyBill]

I would say Form 2106.

However, I think the deduction would be very limited. I would think he could only deduct 1/365th of the annual expenses, per day that he is there for business.

[Stringbean]

Take Another Look

Not sure I agree with the above, although it appeals to your sense of rationale.

Firstly, is a venue in Las Vegas REQUIRED by the employer? This is going to be tough to justify except under a remote set of circumstances. I would at least inquire why a second home is required, and if so why in Las Vegas. A requirement in a place like Las Vegas, Myrtle Beach, Aspen Colorado, Jackson Hole, etc. ALWAYS raises suspicion. IRS doesn't like excesses, although when they have their annual show, the government people always have theirs in Las Vegas. (talk about hypocrisy). If this is not an employer requirement, there should be NO deduction on a 2106. Sorry.

However, in this event, if he itemizes he should be able to take taxes and interest off as a second home.

If the second home in Las Vegas CAN (somehow) be justified as necessary, then I believe the purchase of the home in its entirety becomes an ordinary and necessary expense, even though usage is limited. It is not possible to utilize the home 50 days a year if the home doesn't exist. The "ordinary and necessary" nature is similar to a buying a plow for a farmer even though the plow is only hooked up twice a year. The home, however, must have a 39-year depreciable life, and any operating expenses would qualify for treatment on a 2106.

If he uses the home 50 days for work and 10 days for personal use, then he must reduce his deductible expenses accordingly, deducting only 83% of such expenses (50/60). And then he is going shave off 2% of his income from this deduction anyway. I must say, however, with respect to an audit that this entire arrangement would be like waving a red flag in front of a bull. He might just consider deducting taxes and interest on Sch A as if this were his second home.

Finally, he should approach his employer about splitting his W-2 into a Nevada amount and a resident state amount. There will be no state income tax in Nevada - probably not even a filing requirement.

[TaxGuyBill]

I guess I should clarify what I meant:

I don't view it as a home office. It is not the "principal place of business" and as Stringbean mentioned, it is not required by the employer.

I view it as "lodging" for traveling out-of-town for work. You can only deduct the actual cost of lodging. The way I see it, the cost of one day of "lodging" is 1/365th of the annual expenses.

As Stringbean mentioned, after the 2% limitation, most likely just claiming the mortgage interest and property taxes on Schedule A is about all that can be done.

[kathyc2]

I guess I should clarify what I meant:

I don't view it as a home office. It is not the "principal place of business" and as Stringbean mentioned, it is not required by the employer.

I view it as "lodging" for traveling out-of-town for work. You can only deduct the actual cost of lodging. The way I see it, the cost of one day of "lodging" is 1/365th of the annual expenses.

As Stringbean mentioned, after the 2% limitation, most likely just claiming the mortgage interest and property taxes on Schedule A is about all that can be done.

Probably should verify that client is not receiving a tax free "reimbursement" from employer for lodging b4 taking deduction.