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Lev
Lev, Tax Advisor
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I am self-employed and my home and a separate office are located

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I am self-employed and my home and a separate office are located in Atlanta. Once a month, I travel to Charlotte, NC for 5-7 days to meet with 2 contractors whom I have hired. I do training, I review their work product, hold planning meetings, etc. I want to rent an apartment in Charlotte to stay in because it will be less expensive than staying in a hotel each visit. Can I deduct the monthly rental expense of the apartment as a Schedule C business expense? My meetings with the contractors will also be held in the apartment. Can I also deduct the cost of furnishing this apartment?
Submitted: 11 months ago.
Category: Tax
Expert:  Lev replied 11 months ago.

Lev :

Hi and welcome to Just Answer!
Generally, you cannot deduct personal, living, or family expenses.
Based on your information - the apartment in Charlotte will be used 100% for business purposes - as a lodging while on business travel and as a meeting place with contractors.
As such - the cost to rent may be deducted as business expenses. You may also deduct the cost of furnishing (business assets with useful live more than a year generally should be depreciated).
As long as there is NO personal use - and the apartment will be used strictly for business purposes - there is no issues with deducting these costs.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.
You might need to support that the total cost of keeping the apartment doesn't exceed normal dwelling cost you would pay if stay in hotel - so your dwelling costs could be considered as ordinary.

Customer:

Lev, thank you for the quick response. I'd like to clarify your last comment about substantiating that the cost of keeping the apartment doesn't exceed the cost of staying in a hotel. How picky would the IRS be about this? If keeping the apartment costs me, on average, $120 per night but local hotels are running $80-$100 per night, could the IRS disallow my deduction of the apartment rent?

Lev :

I may not predict if the IRS will disallow or not any specific deduction. But that is possible if expenses would not be considered as ordinary.
I assume that hotel costs would be assumed ordinary expenses for business travel. If by renting apartment you may less than that - you have a good argument that using the apartment for business travel allows you to reduce expenses. However if you actually pay more - expenses could be considered as not ordinary - and in case of the audit might be disallowed.

Lev :

You originally stated - I want to rent an apartment in Charlotte to stay in because it will be less expensive than staying in a hotel each visit. So the purpose of keeping the apartment is to reduce the business cost - and you should be able to proof that.

Customer:

Okay. I'll definitely gather info proving that the apartment is less expensive than a hotel to have on hand in case of an audit. Thanks for your help.

Lev :

You are welcome.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22642
Experience: Taxes, Immigration, Labor Relations
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