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The MDTAXES Network is an affiliation of CPAs that specialize in the tax planning and preparation for young health care professionals. Please leave your questions or comments for our CPAs, who visit the message board regularly, or review the answers, suggestions and ideas posted in response to your colleagues' questions.
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If you pay rent, claiming the home office deduction is a great thing to do, since it makes a portion of your rent tax deductible.
I recommend that you go to the IRS' web site (www.irs.gov), and take a look at IRS Publication 587, Business Use of Your Home.
In 1999, the rules were changed making it much easier to claim the home office deduction. Before that year, you had to perform the income producing activity within the home office, which meant that you would have been required to meet with patients at your home. Now, performing administrative and managerial tasks within the home office is good enough.
The Publication actually gives an example of a medical professional. Basically, the doctor is given an office in his hospital, but chooses not to use it. Instead, he conducts his administrative and managerial activities within his home office. In the example in the publication, he was allowed to claim the home office. I recommend that when you read through the IRS Publication you make sure to read their examples very closely.
Finally, if you use your home office regularly and exclusively in connection with your profession, the deduction is based on the ratio of the square footage of the office compared to the total square footage of the apartment. Keeping track of your hours isn't necessary.
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Replying to:
Hello,
I am debating whether or not I qualify for and should take a home-office deduction.
My situation is as follows: I am a psychiatry resident, renting an apartment, and working at 2 different hospitals and going to an additional 4 sites for supervision as required by my employer. I was given a tiny office in one hospital 6 months ago, but it is very small and (given all my work sites) not convenient for me, so I don't do my office work there.
Instead I have a separate tiny room in my apartment with a table,chair, and file cabinet. I have used this room exclusively and continuously to do administrative and managerial tasks for my job including: calling patients to schedule appointments, call insurance companies for authorization of payment, transcribe process notes of patients I had seen in the hospital, write longer evaluations of patients I had seen in the hospital, and work on scheduling/ arranging seminars and teaching for the junior residents in my capacity as chief resident. In all, I work in the space about 4 days a week, about 15 hours a week. Unfortunately, for the last year, I didn't record these hours down (although I will start doing that for this year!)
My questions are:
1) Am I eligible for calling this space a home office?
2) Should I call this a home office and take the deduction (i.e. are the risks of the IRS auditing this and denying it based upon the lack of records or other factors too high)?
3) What should I do to improve my home office status this coming year, in preparing for next years taxes?
Thank you!!! 
Zip Code: cpa@mdtaxes.com
Andrew,
I reviewed Pub 587. The author of the original message is a resident, as am I. Therefore, we are both W-2'ed employees. According to the flowchart on page 5 of Pub 587, as an employee, in order to qualify for the home office deduction, one must conduct business in the home office for the convience of the employer. Can we, as resident employees justify a home office for the convience of our employee? In the example of the medical professional (Example 3), the anesthesiologist is self-employed. Thanks!!
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Replying to:
If you pay rent, claiming the home office deduction is a great thing to do, since it makes a portion of your rent tax deductible.
I recommend that you go to the IRS' web site (www.irs.gov), and take a look at IRS Publication 587, Business Use of Your Home.
In 1999, the rules were changed making it much easier to claim the home office deduction. Before that year, you had to perform the income producing activity within the home office, which meant that you would have been required to meet with patients at your home. Now, performing administrative and managerial tasks within the home office is good enough.
The Publication actually gives an example of a medical professional. Basically, the doctor is given an office in his hospital, but chooses not to use it. Instead, he conducts his administrative and managerial activities within his home office. In the example in the publication, he was allowed to claim the home office. I recommend that when you read through the IRS Publication you make sure to read their examples very closely.
Finally, if you use your home office regularly and exclusively in connection with your profession, the deduction is based on the ratio of the square footage of the office compared to the total square footage of the apartment. Keeping track of your hours isn't necessary.
--- --- --- --- --- --- --- --- ---
Replying to:
Hello,
I am debating whether or not I qualify for and should take a home-office deduction.
My situation is as follows: I am a psychiatry resident, renting an apartment, and working at 2 different hospitals and going to an additional 4 sites for supervision as required by my employer. I was given a tiny office in one hospital 6 months ago, but it is very small and (given all my work sites) not convenient for me, so I don't do my office work there.
Instead I have a separate tiny room in my apartment with a table,chair, and file cabinet. I have used this room exclusively and continuously to do administrative and managerial tasks for my job including: calling patients to schedule appointments, call insurance companies for authorization of payment, transcribe process notes of patients I had seen in the hospital, write longer evaluations of patients I had seen in the hospital, and work on scheduling/ arranging seminars and teaching for the junior residents in my capacity as chief resident. In all, I work in the space about 4 days a week, about 15 hours a week. Unfortunately, for the last year, I didn't record these hours down (although I will start doing that for this year!)
My questions are:
1) Am I eligible for calling this space a home office?
2) Should I call this a home office and take the deduction (i.e. are the risks of the IRS auditing this and denying it based upon the lack of records or other factors too high)?
3) What should I do to improve my home office status this coming year, in preparing for next years taxes?
Thank you!!!
Zip Code: slee12@lumc.edu