Deducting business use of your garage
Claiming a deduction for business use of a garage can provide you with additional tax savings. Taking the deduction for several years can result in significant savings.
A garage can be deducted for various reasons, including manufacturing goods, storing equipment and inventory.
There are different methods for calculating business use of the home. To get the maximum deduction, you should calculate the business percentage for each option and then use the largest business percentage option.
You can calculate business use of the home by dividing the actual dimensions of the area used for business by the total square footage of your home.
Another option for calculating business use of the home is by the number of rooms. If the rooms in your home are similar in size, you can calculate the business percentage by dividing the number of rooms used for business by the total number of rooms in your home. If your garage is considerably larger than most of the rooms in your house, your garage may need to be counted as more than one room.
The IRS has different rules for a detached garage. To deduct an office, you are not required to meet the strict tests for a principal place of business or the alternative test for a place to see clients or customers. Fortunately, the test to claim an office in a detached garage is simply to determine that it’s used in the normal course of business. However, to eliminate commuting miles, you need the home office to be your principal place of business. Eliminating commuting miles provides the most significant tax savings for many businesses.
If you don’t have an office in your home, the IRS requires you to determine commuting and business miles. When you leave home, the first stop of the day is commuting miles. Your drive from the last business location to your home would also be commuting miles. As an example, suppose a salesman visited five clients. The trip from his home to his first client would be commuting.
You would also consider the trip from the last client to home commuting miles which is not deductible.
If part of your home is not usable, it is more advantageous not to include it as part of your total home square footage for the business of the home calculation. For instance, an attic without a floor should not be used as part of the total square footage of your home. This would reduce the total square footage of your home and increase your business use of home percentage. If you are using an attic for business but not the garage, you would want to claim the garage is not usable space.
David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at firstname.lastname@example.org