The Mobile Office -- What’s Deductible?

Today Starbucks is office space to many small business owners. With connectivity in airports, hotels, and even McDonalds, it’s easy to work from just about anywhere.

What does this mean from a tax perspective?

Home office
If your home is your principal place of business or the place where you do your administrative work and you have no other fixed location for work, then you can claim a home office deduction. It means you get to write off some of the costs that might otherwise be nondeductible personal expenses, even though you also work at a location other than your home.

Having a home office entitles you to deduct the cost of travel for business from and to your home. Going from your home office to meet a customer at her location or a client in the local diner is deductible.

Examples of business travel from a home office include trips to the:

  • Bank
  • Office supply store
  • Post office

If you use your personal vehicle for business and want to deduct business travel, keep a record of each business trip. The record can be on paper or electronic; an app for tracking mileage on a mobile device is helpful.

Mobile to the extreme
In one recent Tax Court case, a couple took their consulting business on the road, traveling in their $284,000 mobile home for extended periods of time (six months in 2005 and all of 2006). They used one counter top in the mobile home as office space for a computer and office supplies. Their stops included cities where their adult children resided or where the temperature was warmer in the winter than was the temperature at their home in Illinois. They claimed various write-offs for business expenses, which the IRS disallowed. The Tax Court agreed with the IRS.

What was the problem? It wasn’t the fact that they were working mobilely. It wasn’t the fact that they were combining business with pleasure, as evidenced by the locations they stopped at. It was lack of substantiation. They kept receipts of their expenses but no books of account for their business. The court said “handwritten notes on receipts are unreliable.”

Bottom line
When working from a mobile location, take advantage of online options for keeping a complete record of your business expenses. There are numerous apps — some free and some for a modest cost — that you can use for this purpose. Do it and don’t waste deductions for want of paperwork.

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