Question

Discuss whether either of the following individuals are entitled to an office-in-home deduction:

a. Maggie is a self-employed management consultant who maintains an office in her home exclusively used for client meetings and other business-related activities. Maggie has no other place of business and her office is the most significant place for her business. She has substantial income from the consulting practice.

b. Bobby operates his own sole proprietorship as an electrician. He maintains an office at home where he keeps his books, takes phone calls from customers, and does the payroll for his five employees. All of his electrical work is done at the location of his customers.

Answer 1

If you use part of your home for business, you may be able to deduct expenses for the business use of your home.

There are two basic requirements for your home to qualify as a deduction:

1. Regular and exclusive use - You must regularly use part of your home exclusively for conducting business
2. Principal place of your business- You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.

There fore in the above cases

a) As Maggie is self-employed management consultant & who maintains an office in her home exclusively used for client meetings and other business-related activities. Is entitled to claim an office-in-home deduction as it qulifies the basic requirements.

b) Bobby who operates his own sole proprietorship as an electrician,maintains an office at home where he keeps his books, takes phone calls from customers, and does the payroll for his five employees & all of his electrical work is done at the location of his customers,is entitled to claim an office-in-home deduction as it qulifies the basic requirements.