Gross income limitation for the home office deduction on schedule C.

[vrgr79wild]

I think that I have worked through the “IRS speak” in the instructions for schedule C but I would like some confirmation that I have got it right. Using the simplified method, $ 5 per square foot, to calculate the part of the home that is used for business I come up with $ 500. Line 29 is the tentative profit or loss after deducting all other expenses.

The examples below come to mind as how to treat possible outcomes.

A) If the tentative amount is a PROFIT of $ 1200 then ALL $ 500 can be used as the home office expense.

B) If the tentative amount is a PROFIT of $ 300 then ONLY $ 300 can be used as the home office expense.

C) The tentative amount is a LOSS of $ 150, ( or actually any loss ? ), then NONE of the $ 500 can be used as the home office expense.

Have I got all these thought out correctly?

Have I missed any other possible outcomes or considerations?

And, for examples B and C: if I do not use either forms 8949 or 4797, not sure when or how to use them, then any unused part of the expense cannot be carried over to next year.

I assume that TurboTax can handle all this correctly.

Thanks a lot.

[ColeenD3]

You are correct regarding your ability to take the Home Office. A, B and C are all correct. Any amount not used can carry forward on Form 8829.

Form 8949 has to do with sales of investment and Form 4797 has to do with sales of business property. Neither form is used for this purpose.

[vrgr79wild]

Thanks a lot for your great answer!

However, I am confused about the carryover part. Using example B in first post, there would be $ 200 unused; this would be the amount to carry forward.

1) Would this $ 200 be filed on form 8829 in the same year that the carryover was ‘created’, i.e. 2019 ? Or would you use form 8829 for 2020 ?

2) When looking over form 8829 it seems like line 25 is where the $ 200 would go but the rest of the Figure Your Allowable Deduction section is the ‘detailed method’; which is not what I want to use. I suppose that zeros or blanks could be used for all these ‘detailed’ lines; but that might not be allowed. There is no place on 8829 to use the simplified method?

3) The instructions for schedule C have a worksheet and instructions for the simplified method, ( carryovers and form 8829 are referenced ), but, again, it is not clear how or where any carryover amount would be entered.  On schedule C if I said there was 100 square feet used as an office but entered $ 700, $ 200 from a carryover and $ 500 for the current year, then that would likely kick out an error.

Am I crazy or it does seem like the simplified method, amounts to carry over, and the detailed method are not meant to easily co-exist ?? If they are, why not have one form where the detailed method is on the front and the simplified method is on the back.

Thanks again.

Regards.

[ThomasM125]

The carryover amount shows on form 8829 in the current year and will show again in the following year on that form if you enter business income and expenses in the following year. The carryover amount does not show on your schedule C.

[vrgr79wild]

I was hoping for some comments on my thinking that was in paragraphs 2 & 3, above.

Anyway, it appears to me that:

 i )  Carryover amounts can only be used if form 8829 is used

 ii)  Form 8829 does not allow the simplified method to be used – only the ‘detailed method’.

Correct?

Thanks

[KarenM90]

That is correct, the Simplified Method eliminates the need for Form 8829.

However, if you have a carryover, it will need to be entered on Form 8829.