Home Office - Dual-Purpose Bill Payments

[fogpac]

I have a business bank account, typically used for deposits only, and don't otherwise have separate business and personal bank accounts or charge cards.

Can I use my business home office to pay utility, charge card, house insurance, etc... bills that are mixed-use (business and personal), without potentially risking disqualification of home office as non-exclusive?

[MonikaK1]

No, you should not conduct any nonbusiness activities in your designated home office space in order for it to qualify for the home office deduction. As explained on this IRS webpage:

Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:

• There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
• The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

In addition, your deduction for business use of your home may not exceed your business net income (gross income derived from the qualified business use of the home minus business deductions).

If part of your deduction exceeds your net income for this year, TurboTax will carry the excess over to next year in case you have a larger net profit and can use the rest of the deduction.

Please see this TurboTax article and IRS Publication 587 for more information on the deduction for business use of a home.

[fogpac]

Thanks.

So, if I routinely make business purchases with my dual-purpose (business and personal) charge card, when I pay the balance due every month, I have to perform this task outside of the business home office?

The same applies, for instance, to utility bills, of which a % of each qualifies for the business use of home deduction. Even though there's a partial business expense, if it's not a 100% business expense, bookeeping tasks must be done outside of the home office?  Seems illogical.

[AnnetteB6 · Accepted solution]

Yes, it is illogical.  But, to meet the exclusive use test, that is the answer to your question.  

Ultimately, will the IRS know or care that you use the office space to pay mixed-use bills?  Probably not.  But, in the unlikely event that your return is audited and the home office is examined, the question could be asked.  

@fogpac