If the home office deduction is not allowed, since it is limited to gross income (mine was 0) and not to be used to reduce other taxes, why is TurboTax allowing that deduction on my return? Is that a bug? How do I correct in TurboTax?

[Questionasker]

I have completed my return. I have entered the information into TurboTax relating to Profit or Loss From Business (schedule C) and Expenses for Business Use of Your Home (form 8829). This provides a $613 deduction for business use of home that is listed on line 30 of schedule C and is then carried over to schedule 1 along with a business loss of $2032 on line 29 of schedule C. (total of -$2645 business loss) However, when reading elsewhere on-line, and also IRS publication form 587, I learned that someone must have business income to be able use the home office deduction for the current year. I had no sales/gross income for 2019 for this business. (lines 1-7 on schedule C are all 0s. That is, gross receipts, gross profit, gross income.)

I wouldn't mind having that $613 home office deduction TurboTax is providing, but I don't believe it is allowed by the IRS, and therefore don't understand why TurboTax didn't catch that. Am I missing something or is TurboTax?

(On Form 8829 there is a $380 amount that IS being carried over to next tax year, based on home office percentage of utilities, insurance and maintenance, lines 16-26 of form 8829. The $613 being deducted this year is based on home office percentage of real estate taxes, lines 9-14 of form 8829)

[SusanY1]

Are you itemizing your personal deductions?

When you take a deduction for business use of home using actual expenses, TurboTax allocates your property taxes (and mortgage interest, if applicable) between the business use and your personal deductions.

When the home office deduction is subsequently disallowed because you have no business income, the amount of property taxes is then moved back to your personal deductions while the utilities, insurance, and maintenance would carry forward to the next year.  

Could that explain your situation, perhaps? 

[Questionasker]

Thank you. I am taking the standard deduction, rather than itemizing.  In the meantime I got some help from support and it turns out that I needed to enter real estate taxes and mortgage interest as "excess real estate taxes" and "excess mortgage interest", since I am not itemizing.  (Apparently I didn't read all the fine print in the "Learn More" link closely enough and overlooked that instruction, until this got investigated.  By following that instruction all of the home office expenses now carry over to next year and none are deducted this year,  as expected, after understanding that IRS rule of limiting the home office deduction based on the business income.)

[SusanY1]

Thank you for letting us know what worked to resolve this!  This is very helpful information.