Home Office, Vacation Home, and Home Rental Deductions (Portfolio 547)

Robert W. Wood, Esq.
Product Code: TPOR40   Edition Code: TMU547


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Home Office, Vacation Home, and Home Rental Deductions, written by Robert W. Wood of Wood & Porter, describes the operation of §280A, which limits deductions attributable to the business and rental use of a dwelling unit if the property is also used by a taxpayer as a residence during the tax year. Section 280A is intended to prevent taxpayers from converting nondeductible personal expenses into deductible business expenses. 

This Portfolio analyzes the scope and application of §280A, which applies generally to deductions allowable with respect to a dwelling unit personally used by a taxpayer as a residence. A dwelling unit may be a house, apartment, condominium, mobile home, boat, or similar property with basic living accommodations. Section 280A also applies to other property, such as a garage, which is closely related to the dwelling unit. Section 280A prescribes criteria for determining whether a taxpayer's use of a unit during the tax year is sufficient to trigger the section. 

When it applies, §280A generally disallows home business and rental deductions. However, §280A carves out six statutory exceptions to the general disallowance rule. In particular, §280A does not disallow deductions for a portion of a dwelling unit used regularly and exclusively (1) as the taxpayer's principal place of business for any business; (2) as a place where patients, clients, or customers regularly meet or deal with the taxpayer in the normal course of business; or (3) in the case of a separate structure not attached to the residence, “in connection with” the taxpayer's business. Section 280A also does not disallow deductions for the regular (although not necessarily exclusive) use of a residence for certain storage uses and for providing day care services. Deductions attributable to the rental use of a residence
are also excepted from the disallowance rule of §280A.

The standard for determining a “principal place of business” historically caused a significant amount of controversy among taxpayers, the IRS, and the courts. This critical standard, one of the lynchpins of §280A, is analyzed in detail in this Portfolio.  

Home Office, Vacation Home, and Home Rental Deductions allows you to benefit from:

  • Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area
  • Invaluable practice documents including tables, charts and lists
  • Plain-English guidance from world-class experts
  • Real-world and in-depth analysis that lets you explore various options
  • Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more
  • Alternative approaches to both common and unique tax scenarios

This Portfolio is part of the U.S. Income Portfolios Library, a comprehensive series that includes more than 200 Portfolios, which covers every federal tax topic with expert, in-depth analysis, and offer commentary on a wide range of federal taxation topics, including Compensation Planning, Deductions and Credits, Partnerships and Corporations, Special Pass-Through Entities, Corporate Reorganizations, Real Estate, Procedure and Administration, and more.



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