Can we deduct an apartment at a second business location?

July 8, 2005

Subject:  Apartment Rental Deduction
From:  D. Gaunt
Date:  Wed, 22 Jun 2005

Michael:

Can we deduct an apartment at a second business location?

We have a service and installation business that operates in northern and southern Nevada. We have rented an apartment in southern Nevada, because our home is in northern Nevada.

We have started driving and flying back and forth every other week in order to accommodate our customers in a timely fashion.

The southern location apartment rental will probably be temporary (less than a year) in order to decide where the majority of our business is and where we actually need to reside.

I assume we can deduct the travel expenses, but since we are not paying for a hotel at the Las Vegas location, can we write off the rent, utilities, etc. and can we write off or depreciate the furnishings we bought for the apartment.

Thank you very much,
D. Gaunt

Answer

Date:  Fri, 01 Jul 2005

Hello D. Gaunt,

Based on the facts you have provided, I think you should be able to deduct your travel costs and the cost of the apartment. The expense of the apartment is actually a replacement for costs you would otherwise incur if you stayed at hotels.

The danger is you could be found to have two personal residences, neither of which is deductible and for which the travel isn't deductible if this arrangement isn't temporary.

Also for income tax purposes, your residence isn't determined based on your personal living address, but your principal business location.

I recommend that you work closely with a tax advisor to nurse you through this transitional period. Can you afford to separately staff the two locations, instead of doing the work yourself? That would be a better situation.

Good luck!
Mike Gray

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