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Summary 7 2 Final Project Milestone Three Home Office Deductions.docx 7.2 Final Tax Planning: The Home Office Business Deduction Southern New Hampshire University RESEARCH MEMORANDUM Facts: Nora wants to know if she qualifies for the home office deduction.$7.49
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Summary 7 2 Final Project Milestone Three Home Office Deductions.docx 7.2 Final Tax Planning: The Home Office Business Deduction Southern New Hampshire University RESEARCH MEMORANDUM Facts: Nora wants to know if she qualifies for the home office deduction.
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7 2 Final Project Milestone Three Home Office D 7.2 Final Tax Planning: The Home Office Business Deduction Southern New Hampshire University RESEARCH MEMORANDUM Facts: Nora wants to know if she qualifies for the home office deduction. Nora has a 300-square- foot room in her 2,000 square foot...
7 2 final project milestone three home office deductionsdocx 72 final tax planning the home office business deduction southern new hampshire university research memorandum facts nora wants
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7.2 Final
Tax Planning:
The Home Office Business Deduction
Southern New Hampshire University
RESEARCH MEMORANDUM
Facts: Nora wants to know if she qualifies for the home office deduction. Nora has a 300-square-
foot room in her 2,000 square foot home that she uses for her bakery business for administrative
functions, i.e., paying bills and ordering supplies.
Authorities:
I.R. 2020-220
I.R.C. § 162
I.R.C. § 280A
Rev. Rul. 2004-32, 2004-12 IRB 621
Prop Reg § 1.280A-2. Deductibility of expenses attributable to business use of a dwelling unit
used as a residence.
I.R.C. § 162 Trade or business expenses states there shall be allowed to deduce all the ordinary
and necessary fees paid or incurred during the taxable year in carrying on a trade or business.
There is an allowance for salaries, other compensations, traveling expenses, rentals, and
additional payments made as a condition to the continued use or possession of the property with
stipulations.
, The I.R.S. allows eligible taxpayers the ability to deduct certain home office expenses. I.R. News
Release states the home office deduction is available to qualifying self-employed taxpayers,
independent contractors, and those working in the gig economy. A taxpayer qualifies for the
home office deduction if they use a portion of the home exclusively for conducting business
regularly. Also, the home must be the taxpayer's principal place of business. Furthermore, the
taxpayer must use part of the home in the following ways:
Exclusively and regularly as a central place of business for a trade or business
Exclusively and regularly as a place where patients, clients, or customers meet in the
ordinary course of a trade or business
As a separate structure that is not attached to a home used exclusively and regularly in
connection with a trade or business
Regularly for storage of inventory or product samples used in a trade or business of
selling products at retail or wholesale
For rental use
As a daycare facility
The home office deduction lets a taxpayer claim the business portion of real estate taxes, rent,
mortgage interest, utilities, rent, depreciation, insurance, maintenance, and repairs in a section
280A defined dwelling unit. However, the taxpayer may not deduct expenses for part of their
home not used for business, i.e., lawn care. When claiming the deduction, taxpayers may use
either the regular method or the simplified method.
When using the regular/detailed method, taxpayers compute the business use of home deduction
by dividing expenses of operating the home between personal and business use. To calculate the
business use portion, an individual starts by dividing the square footage of the business area by
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