Home Office Deduction For Traders

Did turbo tax  make changes to these forum as there  were few threads I have saved with notification on but cant find them?

Yes.

Intuit completely overhauled the structure, which caused many bookmarked threads and notification links from previous years to break or disappear.

Both options you mentioned carry heavy compliance risks and will disrupt how TurboTax calculates your final liability.

• Option 1 : You’re  right, etering fake income under "Gross Receipts" on Schedule C will flow to Form 1040 and Schedule 1, creating unnecessary income tax. Worse, it will trigger Self-Employment (SE) Tax (Schedule SE), charging you an extra ~15.3% on that fake amount.

• Option 2: Entering your actual Schedule D gains directly onto Schedule C to "unlock" the system will double your tax liability. TurboTax will import your true capital gains from your 1099-B onto Schedule D and tax them again as ordinary self-employment business income on Schedule C.

If you have Trader Tax Status, your trading gains are considered "gross income derived from the business activity," even if on Schedule D.

To override TurboTax's automated block safely without doubling your income, you must use TurboTax Desktop. The online web version cannot handle this override without breaking your return.

Step-by-Step Instructions:

• Open your return in TurboTax Desktop and switch to Forms Mode (click the "Forms" icon in the top right corner).

• In the left-hand column, find and open the Schedule C Worksheet (or Form 8829 / Home Office Detail Worksheet if using the regular method).

• Scroll down to the Business Use of Home section or the Simplified Method Worksheet.

• Look for the line labeled Gross Income Limit or Net Profit / Gross Income from Business. (On the underlying smart worksheets, this acts as the "cap" for the deduction).

• Right-click the amount box on that specific line and select Override.

• Manually type your actual short-term capital gains amount into that box. The field will turn red or yellow, indicating a user override.

Thanks M-MTax

In interview mode I choose Simplified method. I have 3 forms created by Turbo Tax.

Sch C

Form 8829 (my address) - In this form there is a small section Simplified Method Smart Work Sheet

Sch C Wks

I am not seeing this line, could you please guide me which Form or Line number or Section.

“Look for the line labeled Gross Income Limit or Net Profit / Gross Income from Business. (On the underlying smart worksheets, this acts as the "cap" for the deduction).”

This is what I am seeing in Sch C

This is what I am seeing in Form 8829 , not sure from where number 12 come under 300

Thanks

I have Trader Tax Status but without MTM/475 Election

Which answer to choose if Trading is QBI in Sch C? Not sure if there is difference TTS with or With MTM or Having an entity with S corp with Payroll. There is no income to be reported on Sch C in my case so which is best answer in my situation?

sorry Rev Proc 2013-13 section 4.08(2)bars the deduction

 The amount of the deduction computed using the safe harbor method provided by this revenue procedure cannot exceed the gross income derived from the qualified business use of the home for the taxable year reduced by the business deductions described in section 4.05 of this revenue procedure (deductions unrelated to the qualified business use of a home).  Any amount in excess of this gross income limitation is disallowed and may not be carried over and claimed as a deduction in any other taxable year. 

form 8829 is not used on schedule C when claiming safe harbor. see line 30 of schedule C. 

Traders have 2 options: Treat their trading gains and losses as capital gains/losses. The default method. Thus, they generally have a net loss on schedule C. Therefore, they get no home office deduction under either of the HO methods. Capital gains and losses do not count as business income under 199A and are not ordinary income which is needed for the HO deduction. The other option, where applicable, is the Mark-To-Market election under 475(f). Gains and losses are treated as ordinary income and reported in the business section of form 4797. If there is a profit when linked with schedule C, then some or all of the home office deduction is allowed. Either HO method can be used.  Making the election makes the trading gains and losses part of the 199A regime since they are now ordinary income. Traders are not subject to SE tax.    

Thanks A lot M-MTax.

Well I posted this snap shot I did not added expenses in Sch C. 

Lets say my trading Expenses are  $5000

They are showing up as  “  - 5000       “   in Line A of Simplified Method WorkSheet.

Which Gain one should consider? Overall (combination of Long term and short term) or from 6781 or 8949  or Line 7 of Sch D (overall short term gains)  or  Line 16 of Sch D (overall total gains)?

Let say my gains are $50000 so it will manually override it  to $45000 (50-5)?

Would this change of number go to any other Form?

Thanks again.

Thanks ​@M-MTax  and ​@Mike9241 

For your replies and sharing your insights. So Office deduction is NOT available to me this year as I don’t have any ordinary income from my business.

I have read somewhere that you should still add Office deduction expenses in Sch C (even though it is NOT deductible this year) as those expenses carry over to future years (perhaps as some sort of loss so not sure what is proper terminology, NOL may be?). If in the future I have Ordinary business Income then those office expenses can be deducted from that ordinary income in those years.

Is there some truth to that? Or it depends as there are 2 ways to deduct office expenses, Simplified or Actual expenses so not sure which office deduction method applies here. 

If this is possible how to do it, as I did not see my current Home office deduction going any where? 

there is no carryover if you use the simplified method. if you use the actual expense method you need to complete the 8829. The carryover should appear on line 43 of the form

​@Mike9241 

Thanks