I am full-time clergy and have a housing allowance. I also have an unrelated home business where I store inventory and meet with clients for sales. A couple questions...
1) Am I required to take a home office deduction on the unrelated business?
2) If I do take the deduction (required or not), do I need to prevent "double-dipping" with my housing allowance and the home office deduction (I am assuming I can't)? My thoughts on a couple ways to do it...
A) Reduce my claimed qualifying expenses based on the percentage of the square footage used. For example, let's say my qualifying expenses are $10,000, the home is 2,000 sf. ft., and the home office is 100 sq. ft. 100 sq. ft. is 5% of the 2000 sq. ft. So, I'd only claim $9,500 as my qualifying expenses (5% of 10,000 = 500. 10,000 - 500 = 9500).
B) The other thought is to reduce the claimed square footage of the home. Using the above example, I'd just take the housing allowance based on a 1900 square foot home, and the office deduction based on a 2000 sq ft home. I don't know if this would cause a sort of internal error with the square footages not matching though. This method would potentially reduce the maximum amount I could claim because it would lower the fair market rental value. Either way, my desire is to do it properly.
