Did I misunderstand the program’s guidance?
Yes. But there's a reason you misunderstood it, and it's not your fault. Your scenario is not all that common, so the program isn't providing the clarity you need. Therefore, I am providing the clarity you need.
The program is asking if you claim a home office for your rental business. Since you are *NOT* a real state professional, your answer to that question *must* be no. That's because you are not allowed to claim a home office for the rental business.
If you were a real estate professional you would be reporting your rental income on SCH C and therefore claiming a home office on SCH C for your real estate business. This would matter for the SCH E. But since you are not a real estate professional by any stretch, you do not qualify to claim a home office *FOR THE RENTAL BUSINESS*. So when working through the SCH E and asked if you claim a home office, you *MUST* answer that question NO for your specific and explicit scenario.
