Tax Home – What is it?

Situation: “I am self-employed, have an office in my home, but I only EARN my money when I am not sitting in my home office (traveling sales person, nanny, construction worker, cleaning person, social worker, etc.). My mileage is all 100% deductible, because I’m self-employed and have a home office, right?” UGH! To say this is tricky is an understatement! Let’s start at the foundation: A QUALIFIED (tax deductible) home office is used regularly (most $ is earned at this location), exclusively (100%), and is necessary. Does this person have a QUALIFIED home office? No, because where do they earn their money = outside of their home office…does the business exist without the home office (think construction worker) = yes!
Now what? So the IRS says we go to “TAX HOME” – you say, what the heck is that? Basically, it is anywhere that you regularly do business (earn $), which can be defined as a QUALIFIED home office, off-site office, an entire town, county, or even a mileage radius around your primary residence, etc. Why does this matter, you ask? Well, commuting miles (travel between your primary residence and your “tax home”) are non-deductible. Oh, yes, I see your head spinning 🙂 We know this person does not have a QUALIFIED home office, so to keep things easier we say the mileage to the first location is non-deductible commuting and the mileage home from the last location is non-deductible commuting. Oh, but Krista, “I” only go to one location per day and it is usually 30 miles from my primary residence…I’m with you, I hear you, I understand, but unfortunately, I don’t make the IRS rules (See http://www.leagle.com/…/19727973…/MARKEY%20v.%20COMMISSIONER) Yes, as a self-employed business you get to deduct expenses, but you also have more complex rules and regulations in order to PROVE the deduction is legal. Remember the burden of proof is on you not the IRS!

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