Your Schedule C should only reflect income and expenses for that business. Your K-1 business (s-corp) is a separate entity and your expenses from that business should be included as part of the K-1, either by the S-corp paying you rent for your home office space or the S-cop reimbursing you through an accountable plan. Since your Schedule C is showing a loss, you cannot take a home office deduction for that small but still separate business. The Line 25 Utilities Expense - These expenses apply only to utilities used at your business office(s) or properties, not in your home office. So, the home office expense attributable to your Schedule C business is not deductible because of the negative income amount reported on Schedule C.
Unreimbursed corporate expenses paid by shareholders are treated as unreimbursed "employee" business expenses. Under the TCJA, unreimbursed employee business expense deductions are no longer permitted. Like other employers, S corporation owners should establish an accountable plan to have the company reimburse home office allocations. For home office expenses related to the S-corp:
- The S corporation can pay you a rental fee for the home office.
- The S corporation can pay you for the costs of a home office under an "accountable" plan for employee business expense reimbursement.
S-corporation home office deductions, reimbursements and expenses - These expenses should be included on the S-corp tax return and pass-through to you via the K-1 and/or your W-2.
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