I am starting work as an independent contractor in another state. I
rent an apartment where I live. I am also planning to rent an
apartment where I work (lets call this business area). Now i was told
that I can tax deduct rent I pay in the business area. Now I want to
complicate this scenario
a little bit. I want to vacate my apartment where I live and move in
my friend's apartment in the same area where I live (lets call this as
home base). This way I pay less rent if I share with my friend. Can I do that and
still tax deduct the apartment rent where I work i.e my business area.
I want to visit my
home base every two or three weeks. So will I be able to claim mileage
(for trip back to my home base) and per diem during my stay in the
business area as tax deductible expense?
Or should I just keep my apartment in the home base instead of
vacating and moving to my friend's apartment in the same area?
Thanks

Dear truthsetfree,

Once again, I am not a lawyer or tax preparer, but I can convey to you
what I have learned from official IRS documents.

First of all, according to Publication 463, the business area where
you live is considered your tax home.

"To determine whether you are traveling away from home, you must first
determine the location of your tax home. Generally, your tax home is
your regular place of business or post of duty, regardless of where
you maintain your family home. It includes the entire city or general
area in which your business or work is located."

Publication 463 (2003), Travel, Entertainment, Gift, and Car Expenses
http://www.irs.gov/publications/p463/index.html

Publication 463: Tax Home
http://www.irs.gov/publications/p463/ch01.html#d0e501

Furthermore, Publication 463 states that if you travel away from from
your tax home to a family home where you live but where you are not
employed, you are not considered to be traveling on business.

"If you (and your family) do not live at your tax home (defined
later), you cannot deduct the cost of traveling between your tax home
and your family home. You also cannot deduct the cost of meals and
lodging while at your tax home."

Publication 463: Traveling Away From Home (see under "Travel to Home")
http://www.irs.gov/publications/p463/ch01.html#d0e429

Even though you will have lodging expenses in your tax home, which you
call the business area, you are not considered to be traveling, so the
business-area rent is not deductible as a travel expense. The best you
can do as a self-employed individual is to claim the expense of
running a home office, if any, in your tax home.

When you travel to your original apartment or to your friend's
apartment, you are not traveling to your place of work, so the cost of
this travel is not deductible either. The choice of whether you keep
your current apartment or move into your friend's apartment is
therefore immaterial for the purpose of taxation. You should choose
whichever is more convenient and/or affordable within your budget. I'm
sorry to be the bearer of bad news, but these are the IRS rules.

If you feel that my answer is incomplete or inaccurate in any way,
please post a clarification request so that I can meet your needs
before you assign a rating.

Regards,

leapinglizard