Discussion:Business Use of Second Home
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| 13 June 2008 | |
| Financial advisor, who is a sole proprietor, has a regular business office in one state, and also has numerous clients in another nearby state and travels there regularly to meet with clients. He would like to purchase 2-bdrm condo in second state to use one bedroom as office and other as place to stay when traveling there. Assuming he would meet the "place to regularly meet clients" test versus the "principal place of business test," and if he meets the exclusive use test for an office in this second home, would the similar expenses for business use of home qualify as deductions for this second residence and be calculated on Form 8829? Or would there be a different way to take Sch C deductions for this, e.g. - deduct on Sch C rent paid to self that would then be claimed on same taxpayer's Sch E, expenses subject to Sec 280A limitations, etc? | |
| 13 June 2008 | |
| 8829 applies to "residence"...he can only have one legal home so i would consider the room in the second building as an office and allocate expenses based on a combination of sq ft and amount of time used on his Sch C.
He would not have to pay himself rent...all applicable office expenses would be allocated as: 1. sq ft of office divided by sq ft of unit to get percentage allocated to office. Rent paid X percentage gives you total office rent for month. 2. number of days in month office is used divided by total number of days in month gives you percentage of total office month rent allocate to office rental expense. Same formula would be used for all other indirect expenses for the use of the office. taxea | |
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