Section 280A: Home Office Deduction Rules

Many people who have office jobs envy those who can work from home. If you're a small business owner, freelancer, or kick-ass entrepreneur who uses a home office, you probably know that the truth is a little bit more complex. Sure, you can sometimes get away with working in your pajamas, but working from home also takes a lot of discipline and incurs many costs. Fortunately, there is an entire section of the Tax Code that allows for home office deductions that can add up to significant savings. Meet Section 280A, the birthplace of those sweet, sweet write-offs. Read on to learn how to make the most of your Home Office Deductions while staying compliant with the IRS's rules.

Rule #1: You Must Have an Actual Home Office

You can take advantage of the benefits of Section 280A if you have a dedicated office space in your home. Uncle Sam calls this the "regular and exclusive use" requirement. Now, Uncle Sam is reasonable about this. Your entire home does not have to be business-only, but you must have a space in it that is solely for business purposes.
In theory, you could convert your neglected TV room or basement for this, but you have to use it only to manage your business. We have many real estate investor clients who do exactly this and are still acting within the lines of the law. This rule is designed to keep unscrupulous taxpayers from writing off personal expenses as business expense. Of course, we know you wouldn't do that. Just be sure you can prove your case if anyone looks into the use of your home office space.

Rule #2: Your Home Office Must Be Your Business's Base of Operations

The IRS calls this rule the "principle business location" requirement. In plain English, this means your home office must be where the majority of your business is conducted. Let's say you are running a real estate business from a home office. If you are using it for most of your business activities (phone calls, meetings, computer-based work), you can still use another location for other purposes. But only to a point. Having a separate office for meeting high-profile clients or completing shipping duties, for instance, would still qualify you for Home Office Deductions.
One caveat of this rule to understand is that the IRS takes the literal amount of space in your home devoted to business only into consideration. The more physical space in your home that you devote to your business, the better.

Get Professional Help With Your Home Office Deductions

Most people with reasonably stable mental health don't enjoy spending their free time deciphering the tax Code. While this article has explained the basics, these issues are complex. Fortunately, you don't have to slave over the time-consuming process of understanding every detail of Section 280A. That's why the smart move is to get advice from the tax professionals at Royal Legal Solutions. Our tax attorneys already know the Internal Revenue Code inside and out. After all, many of our clients are take-charge entrepreneurs who work from home. In fact, so many of our investors are self-employed individuals that we also offer retirement planning advice for self-employed individuals. Don't torture yourself too much trying to understand the regulations: get professional help today.

Last Updated: 
August 25, 2018

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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