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Lesson 1: Introduction, Background, and Review

Mixed-Use Assets or Expenses

Man using telephone in home office.
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The rules determining deductible business expenses get murky when there are mixed-use assets or mixed-use expenses. These are assets or expenses that are used for both personal and business purposes.

For example, if the business operates out of an office in the owner’s home, the home is a mixed-use asset. The expense of heating and air conditioning in that home would be a mixed-use expense. In these cases, the cost of the asset or expense must be allocated between business and personal use. So, if the office uses 20% of the home, 20% of the expenses of running that home are deductible business expenses, and the owner can capitalize and deduct 20% of the cost of acquiring and improving the home as depreciation.

Click each button below to learn more about mixed-use assets and expenses.

 

Mixed Use – Automobile

For mixed-use expenses, contemporaneous records of business use may be required. In the case of a car used for both business and personal purposes, the law requires a contemporaneous record of all business usage, including date, purpose, and mileage, to prove either the percentage of business usage or the number of miles driven for business purposes. The business would need to maintain the same types of records for other mixed-use items, such as cellphones or computers.

Mixed Use – Meals and Entertainment

The deduction of meals and entertainment expenditures for business purposes is limited, since both clearly have a personal aspect as well. Under prior law, the value of employer-provided snacks and beverages was 100% deductible to an employer. Upon enactment of the TCJA, certain employer-provided meals are only 50% deductible from 2018 through 2025.

 


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