Sometimes, Congress makes laws too hard and sometimes it makes laws too easy. For the past 23 years, Congress made the "home-office" rules way too hard. The Supreme Court in Soliman confirmed the nightmare when it denied the home-office deduction to an anaesthesiologist who had only one office -- his office at home. Taxpayers complained about the unfairness of this result. Congress listened and then enacted corrective legislation that makes the home-office deduction available to virtually everyone.

The new law, effective for 1999 says that a home office qualifies as the "principal place of business" if the taxpayer meets two simple requirements:

• The taxpayer uses his home office to conduct the administrative or management activities of his business, and
• The taxpayer does not conduct substantial administrative or management activities at another fixed location of his business.

Tax-smart money: Smith lives in a $300,000 home. The home-office takes about 15% of his home. With or without the deduction, Smith is going to live in this home and use this home office. But with the home-office deduction, Smith pockets about $3,000 in tax benefits.

Technical note: In passing this law, Congress noted that if a taxpayer conducts some administrative or management activities at a fixed location of the business outside the home, the taxpayer still is eligible to claim a deduction as long as the administrative or management activities conducted at any fixed location of the business outside home are not substantial (e.g., the taxpayer occasionally does minimal paperwork at another fixed location of the business). The congress also noted that a taxpayer's eligibility to claim a home office deduction is not affected by the fact that the taxpayer conducts substantial non-administrative or non-management business activities at a fixed location of the business outside the home (e.g., meeting with, or providing services to, customers, clients, or patients at a fixed location of the business away from home).

Technical interpretation: Regardless of the number of other office locations you have, you may claim the home office when you use it as the major location for your administrative or management activities.

As under present law, for the home office to meet the above two-part test, the home office also must be used:

• Exclusively for business, and
• Regularly for business.

Technical notes: The taxpayer who uses his home office exclusively and regularly to conduct administrative or management activities for his business, and who does not conduct substantial administrative or management activities at any other fixed location of the business, qualified for the home office deduction even if administrative or management activities, such as billing, are performed by others at other locations. The fact that a taxpayer also carries out administrative or management activities at sites that are not fixed locations of the business, such as a car or hotel room does not affect the taxpayer's ability to claim a home office deduction under the law.

The taxpayer may simply decide "not to use" the office outside the home for "substantial" administrative or management activities. This decision coupled with the decision to perform the administrative or management activities at home produces qualification for the home office deduction. Is this easy or is this easy? Easy -- thank the law!

Death of the "red flag:" The new law creates a new set of parameters for the home-office deduction that eliminate the old "red flag" worries that caused the Soliman case. Those worries, "situs of income" and "focal point of business" tests, are gone from the law.

Technical note for employees: In the case of an employee, IRS rules revolve around a simple phrase "convenience of the employer." The question whether an employee chose not to use suitable space made available by the employer for administrative activities is relevant to determining whether or not the "convenience of the employer" test is satisfied. The employee must use the home office for the "convenience of the employer." The employer may designate that such "convenience" include administrative or management activities.

Tax smart note: Now you can qualify for the home-office deduction in the following ways:

• Place for administration and management (new law)
• Focal point of business place (current law test)
• Place to physically meet and greet prospects and clients
• Place to work that is "physically not attached" to your home (like a detached garage or guest cottage)

Home: The home-office rules apply to houses, apartments, condominiums, mobile homes, boats, and other similar property used as the taxpayer's home.

More car deductions: The IRS ruled that the taxpayer who qualifies for the home office deduction under the "principal place of business" test does not have to consider the "first and last stop" rule. This rule comes into play when the taxpayer has no office outside the home and does not qualify a home office as his "principal place of business." In such cases, the trip by the taxpayer from his home to his first business stop is considered a personal "commute." Similarly, the IRS counts to the taxpayer's trip from last business stop home as personal. The new law makes the "administrative or management" use of the home office qualify for principal place of business.

Tax-smart driving: Make your home office your "administrative or management" headquarters to increase deductible business mileage.

Example: Jill Boyd runs her business from her home. She has "no office outside the home." Before the new law, Boyd incurred commuting mileage every morning on her way to see prospects. Similarly, on the way home she incurred commuting mileage. For the year, Boyd incurred 7,000 commuting miles. The new law changes nothing about how Boyd operates her business, but now the 7,000 miles become business miles. This change alone adds more than $2,300 in new tax deductions to Boyd's tax return.

Technical note: For taxpayers who have an office outside the home, "temporary stops" can eliminate commuting mileage. However, the new "administrative" office makes eliminating commute mileage a hassle-free operation. Simplify your car mileage deductions -- make your home office your administrative or management headquarters.

Summary: The new home-office rules make it easy for you to qualify for this deduction. Further, the deduction is worth it because you:

• Realize about $1,000 per $100,000 of house.
• Identify far more equipment and furniture for deduction.
• Eliminate commuting miles when your home office is your principal place of business.