The home-office deduction is becoming more and more popular, and I thought you would like some insights.
The tax code gives you only four ways to qualify for the home-office deduction:
- Cash register. Principal place of business (the office from which you make the cash register ring). This method of qualifying is generally referred to as the Soliman rule.
- Administration. Principal place of business (a place of business used by you for the administrative or management activities of any trade or business of yours, if there is no other fixed location where you conduct substantial administrative or management activities of such trade or business).
- Physical meet and greet. A non-principal place of business (a place of business used by patients, clients, or customers in meeting or dealing with you in the normal course of your trade or business).
- Detached structure. A non-principal place of business (a separate structure that is not attached to the dwelling unit but is used in connection with the taxpayer’s trade or business).
You achieve the best tax results when your home office qualifies as a principal office under the rules above, because the principal office allows you to deduct commuting mileage from your home to your outside office.