Home office and mileage deductions, done in a way that holds up
Two of the most claimed and most misunderstood small business deductions. What qualifies, what the records need to show, and where people get into trouble.
By Sankha NagChoudhurySeptember 11, 20267 min read
These two deductions are legitimate, widely available to self-employed people, and routinely claimed badly. The deduction is rarely the problem. The records behind it usually are.
The home office test is about exclusivity
The space generally has to be used regularly and exclusively for the business, and be your principal place of business. A desk in the corner of a spare room can qualify. The dining table where the family also eats generally does not.
Measure the square footage of the qualifying space and the whole home; the ratio drives the deduction.
A simplified per-square-foot method trades a smaller deduction for far less record keeping.
The actual-expense method can capture a share of rent, utilities, insurance and repairs — and needs the receipts to prove it.
Employees working from home generally cannot take this deduction on a federal return.
Mileage is won or lost in the log
A mileage deduction is only as strong as the contemporaneous record behind it. A log written at the end of the year from memory is the single weakest thing you can bring to an examination.
Record the date, destination, business purpose and miles for each trip, at the time.
Commuting between home and a regular workplace is generally personal, not deductible.
The standard mileage rate is simpler; actual expenses can be larger for costly vehicles but require full cost records.
Whichever method you pick in the first year for a vehicle can limit what you may switch to later.
Where people get into trouble
Almost every problem in this area comes from mixing personal and business use and then estimating the split afterwards. Separation up front makes the deduction easy to defend and the bookkeeping quicker.
Claiming a whole room that is genuinely shared with family life.
Deducting the same vehicle cost twice under both methods.
Recreating logs and receipts long after the fact.
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