Home Office for Parternship

[Casey K]

Hello, How do I write off a home office for the Real Estate that we own under an LLC. We file a 1065 with Turbo tax, but I did not see where to put that type of expense within the rental house, would it be a regular business expense? If so how is that treated for deduction purposes. Thanks !

[OlgaS]

There is no specific form for 1065 to write-off Home office expenses. You have to calculate separately you expenses for Home office (take in consideration such expenses as Rent or Depreciation of the house (if you own), Property taxes, Mortgage interest, Repairs, Internet, Utilities, Insurance etc.).

Then, you calculate a portion of your Home office based on sq. ft. and enter expenses directly into Business Expenses section.

For example, you use 200 sq. ft out of your 2000 sq. ft. house. Based on this, you can deduct 10% of all your expenses for home, that are connected with operating your Home office. Some expenses that occurred exclusively for your office could be 100% deductible.

Thank you for participating in this event!

Olga S.

[MariaDG]

Claiming a home office expense is a bit trickier for a partnership LLC, but can certainly be done.  There are two ways to approach this deduction.  

1.  If under the partnership agreement you are eligible to submit expenses for reimbursement, you are precluded from taking a deduction on your personal return for any amounts paid out of pocket. Instead, you would have your LLC reimburse you for the expense of using a portion of your home for the business.  Then the partnership would deduct that expense on the 1065.  (the reimbursement is not taxable to you) This option will generally be more financially beneficial.  You will receive the entire amount of the expense, as well as a reduction in taxable pass through income.  However, your LLC must have an accountable reimbursement plan, and you must submit your reimbursement request with appropriate documentation within the time frames required by your partnership’s accountable plan policy.

2. If your partnership agreement or business policy does not allow expense reimbursement, you would claim the expense as a UPE (unreimbursed partner expense) on your personal return.  

In Turbotax, when entering the K-1 information you check the box that "You are required to pay supplemental business expenses...". The next screen then is Unreimbursed Partnership Expenses and you check the Yes box. Then proceed to enter the expense. 

Regardless of which option you choose, you will need to calculate the accurate deduction for your home office use.  You can download form 8829 to figure out how much deduction you are entitled to. 

There are strict IRS rules regarding who qualifies to take a home office deduction, and what expenses are included.  

To deduct expenses for business use of the home, you must use part of your home as one of the following:

1. Exclusively on a regular basis as your principal place of business for your trade or business;
2. Exclusively on a regular basis as a place where you meet or deal with your patients, clients, or customers in the normal course of your trade or business;
3. A separate structure that's not attached to your home, used exclusively on a regular basis in connection with your trade or business;
4. On a regular basis for storage of inventory or product samples used in your trade or business of selling products at retail or wholesale, so long as your home is the sole fixed location of such trade or business;
5. For rental use; or
6. As a daycare facility.

Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs.

This IRS resource may be helpful: https://www.irs.gov/taxtopics/tc509#:~:text=Deductible%20expenses%20for%20business%20use,depreciatio....

[Jackstar221]

Here is a link to an accountable plan template, which is required if you are claiming home office expenses on a partnership 1065 tax return:

https://accountants.intuit.com/taxprocenter/wp-content/uploads/2017/09/a21e5-accountableplanagreemen... 

Have all partners sign and date it, and please maintain it for your business taxes records.