As an S-Corp, you have 3 options for deducting home office expenses:
1) using Schedule C on your Form 1040. Business owners may qualify to claim the home office deduction if they have their own business and use a portion of their home as their principle place of business.
2) the S-Corp can pay you rent for the home office - in this situation, the payment to you for rent from the S-Corp will be treated as income, which will be reported by you in Schedule E of your Form 1040, while the payment made by the S-Corp will be deductible to theS-Corp
3) setting up an accountable reimbursement plan - this provides the greatest tax savings in that the S-Corp will reimburse you for the home office expenses and this reimbursement is deductible for the S-Corp and will not be treated as income by you. For the reimbursement plan to be classified as an accountable plan, the expenses reimbursed to you must be for business-related activity. You cannot reimburse personal expenses. Create a monthly Employee Expense Report (since you are solo being that you are a single-member LLC being treated as an S-Corp) for your S-Corp. You can include a Home Office section in this report. In the home office section, you will multiply the business use percentage (which is essentiatly the sq footage of your home office divided by the total sq footage of your home) multiplied by the total home expenses, such as mortgage interest, rent, insurance, utlilities, repairs, etc
Assuming what you have mentioned are as so and you are self-employed. Yes, you can still deduct a portion of these expenses as business expenses. From a mathematical standpoint, you will use the actual method of determining the home office deduction. Below is the formula
% allocation of home expenses = (square footage of your home office)/(total square footage of your home), this will give you the allocation percentage you will factor in to your total cell phone bill, internet bill, and other utilities giving you the deductible home office expense amount.
In short, once you get the % allocation, you will multiply this by your total home expenses that are ordinary and neccessary for business purposes to give you the deductible portion of home expenses for your business activity.
[Edited 6/5/2024|8:02am PST]
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