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Canonical link vs root domain
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I have a wordpress website installed on http://domain.com/home/ instead of http://domain.com - Does it matter whether I leave it that way with a canonical link from the domain.com to the domain.com/home/ or should I move the wordpress files and database to the root domain?
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Not quite certain what you mean here, Joseph. Are you saying that the whole website is made up of a WordPress install, and that install is at /home? Or are saying that you have a website, and part of that site is a WordPress install at /home. I.e. are there any pages of your website that are not generated by WordPress?
If your whole website consists of just the WordPress install, you absolutely need to move it to the root of the domain. There are just too many future problems, compromises and hassles if you leave it where it is.
The canonical tag (even if you could use it in this instance) is no magic bullet to make up for a sub-optimal architecture decision.
Paul
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If you are adding Canonical tag to the main website, it will tell Google that the content available on domain.com is the original content but if the links are going to point on domain.com/home then link juice will not transfer to the main Domain.
If I would be at your place I would have tried using 301 redirection from domain.com/home to domain.com as this way all of my content will be appearing on the main domain and if my links are pointing to domain.com/home the juice will automatically transfer to the home page as the redirection is 301.
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