George Saenz writes about home office tax requirements and private mortgage insurance.

Ask the tax adviser
By George Saenz • Bankrate.com

Tax Talk with George Saenz April 4, 2000 -- Today, the tax adviser discusses the rules for home office deductions and explains private mortgage insurance.

Home office tax requirements

Dear Tax Talk:
Curious to know if you recommend taking a home office deduction, since this deduction appears more liberal now than in the past. I work out of my home and have an office set up with all the bells and whistles, but travel to meet with clients occasionally. Please advise. Thanks!
Buddy

Dear Buddy:
I strongly encourage the claiming of deductions that are legitimate. The home office deduction is a legitimate deduction that the IRS scrutinizes, but if it is your principal place of business, there should be no reason not to claim the expenses. The law does not preclude the deduction because you travel to meet with clients. Instead, the law extends the deduction to those who use their home office to regularly meet with clients, patients or customers. You can claim the home office deduction, even though you do not meet with clients, patients or customers at home, so long as it is your principal place of business.

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Additionally, when your home is your principal place of business, your business use of your automobile begins when you leave your house to meet with clients or other business related matters such as going to the bank, post office or to meet with your CPA. You didn't say if you were self-employed or an employee, but see my earlier Tax Talk answer on how to claim home office expenses.

You also can check out Bankrate.com's Tax Tips, Home office deductions just got easier and Tax strategies for home offices.

Private mortgage insurance

Dear Tax Talk:
Can I deduct the private mortgage insurance (PMI) that I pay for my FHA home mortgage?
Mike

Dear Mike:
When you think about it, PMI is in effect paying more interest (coincidentally PMI) for your loan. Unfortunately, the IRS does not consider it interest. Private mortgage insurance is not deductible when paid on a personal residence. PMI on rental property would be deductible.

New legislation requires a lender to drop PMI when your mortgage gets below 80 percent compared to value (sometimes current value, sometimes original cost). Unfortunately, the legislation does not apply to FHA mortgages, which may require payment throughout the loan. Our affiliated site offers substantial advice on how to get your lender to drop PMI.

-- Posted April 4, 2000

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