WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby Tax Savings with the Lost Home Office Deduction, Part 2 It was only when the tax return preparation process was underway that many drilling contractors and business owners discovered the home office expense deduction no longer existed as an itemized per- sonal deduction. Fortunately, the self-employed and businesses can continue to write-off and deduct the cost of a home office - if they qualify. Qualifying is relatively straight-forward. In general, part of the house must be used: * Exclusively and regularly as the principal place of business, * Exclusively and regularly as a place where patients, clients, or customers are met in the normal course of business, * On a regular basis for certain storage, or * In the case of a separate structure which is not attached to the home, in connection with the business. A basic requirement, space being used as the principal place of business and used “regularly and exclusively” is defined as follows: j Regular use: A specific area in the home used for business on a regular basis. Incidental or occasional use is not regular use. j Exclusive use: A specific area in the home used only for business. While it is not necessary for the space to be physically partitioned off, the re- quirements are not met if the area is used both for business and for person- al purposes.Ahome office that doubles as a guest bedroom is clearly not used exclusively for business purposes. The principal place of business requirement is fairly broad and doesn’t mean “only.” In fact, the home office will qualify as the principal place of busi- ness if it is used exclusively for admin- istrative or management activities - and if there is no other fixed location where substantial administrative or manage- ment activities are conducted. Obviously, the tax deduction for maintaining a home office and related expenses provides a valuable tax-sav- ing opportunity for the self-employed and owners of many drilling businesses who work from home. While the Tax Cuts and Job Act el iminated many deductions formerly claimed as miscel- laneous itemized deductions on per- sonal income tax returns, the home office expense deduction continues to apply to the drilling business. The Internal Revenue Service con- tinues to encourage all small business owners to explore the guidelines sur- rounding the home off ice expense deduction and the options available. Remember though, the home office expense deduction applies only to busi- ness usage - managing investments is not considered a trade or business under the rules. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com 31 WorldWide Drilling Resource ® MARCH 2019