Business Tax Deductions:

  • Home Office Deduction.

According to the IRC 26 U.S. Code???280A, https://www.law.cornell.edu/uscode/text/26/280A

home-office must be in connection with your trade or business (or with your income-producing activity)

(1)Certain business use Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the?dwelling unit?which is exclusively used on a regular basis?

(A)

as the?principal place of business?for any trade or business of the taxpayer,

(B)

as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business, or

(C)

in the case of a separate structure which is not attached to the?dwelling unit, in connection with the taxpayer?s trade or business.?Home office deduction is often overlooked.

When the taxpayer elects the safe-harbor method (simplified method) , no depreciation deduction for the home is allowed. It means that the taxpayer doesn’t have the depreciation recapture if they sell the home someday.

Also, you can’t claim any other expenses related to the home office if you elect the safe-harbor home office deduction.

Reference:Legal Information Institutehttps://www.law.cornell.edu/uscode/text/26/280A?The IRS states in their explanations to this Home Office deduction,“There are two basic requirements for the taxpayer?s home to qualify as a deduction:
1. There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
2. The home must be the taxpayer?s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction”.(The above text was copied directly from the IRS explanation via a subscription e-mail).?

Meals and Entertainment Deduction?

According to https://www.law.cornell.edu/uscode/text/26/274 (k)Business meals

(1)In generalNo deduction shall be allowed under this chapter for the expense of any food or beverages unless?

(A)

such expense is not lavish or extravagant under the circumstances, and

(B)

the taxpayer (or an employee of the taxpayer) is present at the furnishing of such food or beverages.

(2)Exceptions Paragraph (1) shall not apply to?

(A)

any expense described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e), and

(B)

any other expense to the extent provided in regulations.Reference: https://www.law.cornell.edu/uscode/text/26/274? ?Read more in detail.