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Subject Author Date
2nd home for exclusive business use Albert Wiersch 04-24-2006
Posted by Albert Wiersch on April 24, 2006, 11:33 am
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 I have a profitable business creating and selling a software
product. I currently use part of my home for the business
and take a home office deduction for the portion of my home
used for business.

I am thinking about buying another smaller home to use
exclusively for business and to work there instead of my
current home. I can work better away from the distractions
of home since my wife stays home, we have pets, and are
having a child soon. Plus, I will have a lot more room for
all the computer equipment, books, and other paperwork that
I have.

Since I will be using the 2nd home for only business, am I
correct to assume that it will cancel my current home office
deductions but I can deduct all the expenses and costs for
the 2nd home on my Schedule C as my principal place of
business? This would include all mortage interest,
utilities, repairs, maintenance, and HOA dues. I assume it
is like having, buying, or renting office space and that all
costs and expenses would be deductible.

Thank you.

--
Albert Wiersch
Fix your website: http://onlinewebcheck.com

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<< and does NOT constitute legal OR professional advice. >>
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Posted by Ernie Klein on April 24, 2006, 3:33 pm
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> I am thinking about buying another smaller home to use
> exclusively for business and to work there instead of my
> current home. I can work better away from the distractions
> of home since my wife stays home, we have pets, and are
> having a child soon. Plus, I will have a lot more room for
> all the computer equipment, books, and other paperwork that
> I have.

As an aside, and not really tax related, the first thing
that pops into my mind are other possible possible problems
resulting from exclusive business of the _entire_ house.

1) Will zoning laws in your area permit such exclusive
business use of residential property? You might think that
what they don't know won't hurt them and how could they ever
find out anyway. They can find out from neighbors who note
odd comings and goings at odd hours. No one ever sleeping
there, etc.

2) If you obtain insurance coverage for a residential
property and have a claim and the insurance company learns
that the property was for business use, they may deny the
claim. It will be obvious to the claims adjuster that the
home is not set up for family living.

3) If you finance the property as residental rather than
business property that might be considered obtaining
financing through fraud (in my opinion - I am not a lawyer).

4) If you do finance and insure as business property to
avoid those problems then #1 above will most certainly
apply.

I would suggest that you run your idea through a local
attorney familiar with the local zoning laws before
proceeding.

--
-Ernie-

"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."

Have you done your backup today?

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Albert Wiersch on April 25, 2006, 7:49 am
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> In general, you can take depreciation, mortgage interest,
> property tax, utilities, etc and so on - that are actually
> paid. If you use some of that space for personal use,
> beware.
>
> One thing to be mindfull of is if there are any restrictions
> on that property, such that would prohibit you having a
> business there. Some are set by the homeowners association,
> others are set by county/city ordinance. Either way you
> should check it out before you buy. And remember, where a
> "home office" may be allowed, a home used as a full-time
> business/office may not be allowed.

Thanks Paul!

What if I used 90% of the house for business instead of
100%? Then could I deduct 90% of the expenses without
worring about using a little for "personal" use?

I am currently investigating the zoning and legal issues.

--
Albert Wiersch
Fix your website: http://onlinewebcheck.com

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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