Turbotax does not include unadjusted basis of home office in UBIA

[zncu]

I am self-employed, with a non-SSTB business that I operate out of my home. In determining the QBI deduction, Turbotax does not seem to include the unadjusted basis of home as part of the UBIA. This part of TT is rather opaque, but I have deduced that the only assets included are computers/equipment. I believe that the percentage of home used as home office should be included in the UBIA. This is important because the total UBIA will affect the phaseout value of the QBI deduction. Is there a way to force TT to do this?

[DavidS127]

Did you use the Simplified Method or the Actual Method to report the use of your home for business?

[AmeliesUncle]

---

@zncu wrote:

 a non-SSTB business

---

Unless I'm forgetting something, non-SSTB businesses don't phase out, and UBIA does not matter.

[EDIT:  Thanks for the correction, my brain is crammed with the CARES Act information I forgot how 199A worked.  😁  ]

[zncu]

@DavidS127 Actual

@AmeliesUncle Non-SSTBs do indeed phase out, from a QBI deduction of 20% of QBI to (25% W2 wages + 2.5% UBIA). SSTBs phase out to zero, that's the key difference. Turbotax does compute the non-SSTB phaseout correctly - it's just that the UBIA is much lower than it could be, because the home office portion of the house is not getting included. So the phaseout is much steeper than it ought to be.

[DavidS127 · Accepted solution]

I was able to replicate your situation in TurboTax Home and Business.  Use Forms mode (icon top right in blue bar) to enter a workaround.

On the "Asset Entry [name]" form titled Form 8829 Asset Entry Worksheet, Section 199A (QBI Deduction Attributes) section at bottom of form, first line is Unadjusted Basis Immediately After Acquisition (UBIA) for this asset, and will be populated with the UBIA for your home office. 

Ostensibly, that number should “flow” to Schedule C, Qualified Business Income Deduction Smart Worksheet (after line 48), line J1.  But, line J1 is blank, i.e., the UBIA of the home office does not “flow” from Form 8829 Asset Entry Worksheet, Section 199A (QBI Deduction Attributes) section.  

If the amount of the home office UBIA from the Form 8829 Asset Entry Worksheet(s) is entered as an “adjustment” on line J2 of the Schedule C, Qualified Business Income Deduction Smart Worksheet, the income limitation calculation on the QBI Component [name] form includes the UBIA of the home office.

@zncu

@AmeliesUncle

[zncu]

@DavidS127 This worked perfectly! Many thanks! 

[turi]

Is the benefit of using the percentage of home used as home office to compute UBIA and then using it to compute the phase out the value of QBI deduction available if I opt for the the simplified home office deduction (i.e.$5 per sq ft capped at 300 sq ft)? Or is it only available for those entering actual expense to claim the home office deduction?

[JulieS]

No, this applies to actual expenses only. When you use the Simplified Method, it's not based on a percentage of the home, just on your square footage.