Home Office deduction split between two rentals and a consulting business

[NLC]

I have a consulting business and two rental properties in two states.  All three are sole proprietor businesses.  In Turbo Tax how do I split home office costs between the three businesses? I understand I need three Form 8829, how do I make that happen in Turbo Tax? Do all three home office costs on Form 8829 roll into Schedule C even though only the consulting business income and expenses are reflected in Schedule C?

[Carl]

Are you a real estate professional? I ask, because rental income/expenses are reported on SCH E *no* *matter* *what*. There are some exceptions. But with only 2 rental properties I'm confident none of those exceptions apply unless your consulting business in some way qualifies you as a real estate professional.

With that said, a passive business reported on SCH E just flat out does not qualify for a home office expenses of any type or in any way.

[Rick19744]

The OP didn't indicate that the rentals were being reported on Sch C.  The last sentence states "....even though only the consulting business income and expenses are reflected in Schedule C."

[Critter]

Do all three businesses use the same square footage ? Or are there separate spaces in the home for each business ?

And why would you put a rental on a Sch C ? Do you provide motel like services/amenities ? Do you have short term rentals like for an Airbnb ?

[Rick19744]

@Critter see my response.  The OP didn't indicate the rentals were on Sch C.

[Critter]

Ok ... so the poster has 2 Sch E rentals  and ONE Sch C business ... the OIH form 8829 can ONLY be used on the Sch C ...  the Sch E rentals do NOT allow an 8829 OIH deduction as already mentioned above. 

[Critter]

" all 3 are sole proprietorships"

Cannot be ... only a sole prop is reported on the Sch C ... rentals are not sole props and are reported on a Sch E.

[Rick19744]

Let's also keep in mind that those using TT may not use the correct terminology.  As we know, this tax world can be confusing.

[NLC]

Thank you for responding.  I am an active participant in my rental properties, but not a real estate professional. 

A phone support TurboTax expert said that was the way to handle it, which didn't make sense to me and so I reached out to the community forum. My situation is somewhat unique in that I have a consulting business, but my client in the first half of the year wanted to pay me through payroll because of their conservative view on independent contractors. Unfortunately, it didn't occur to me at the time that I wouldn't be able to deduct my business expenses, including home office, during that period I was paid as an employee.  I think the confusion over my independent contractor/"employee" status was confusing to the phone support person and I probably didn't explain my situation clearly.

Thanks again for responding.

[NLC]

Thank you for taking your time to respond. My situation is confusing at best. 

[NLC]

Thanks for helping me out on this. Appreciate everyone's help.

[Critter · Accepted solution]

In the most simple terms ... you CAN  take the OIH expenses on the form 8829 for the portion of the year you were self employed and filing a Sch C.

You can NOT take any OIH expenses for the employee portion of the year  OR  on either rental property. 

[NLC]

Thanks for your help. It is much appreciated.

[NLC]

Yep. That's where I ended up. Thank you for going the extra mile with the succinct response.

[Carl]

my client in the first half of the year wanted to pay me through payroll because of their conservative view on independent contractors.

Take a look at your W-2 (any of them). See that box for "statutory employee"? If that box is checked, then  you still enter it in the same exact place in the program you enter any other W-2. However, with that box checked you are allowed to claim expenses against that specific income, on SCH C. Something to remember the next time a client wants to make you a W-2 employee. 🙂