Home office

[brankga]

We lived in a rental house for 8 months while our current home was being built and lived in the current home for the remaining 4 months of 2024.  Both houses had a dedicated office space exclusively for my husband's business.  He was exclusively a 1099 employee for the first 7 months of 2024.  The remaining 5 months he was primarily a W2 employee with minor 1099 employment.  Our personal information obviously has our current address listed, but the 1099 employment was done at our rental house, which was also our address for 2023. How do I split the 1099 home deductions on form 8829 - do I need to complete 2 forms (one for each address) and keep all business expenses separate as well (expenses incurred while at each address)?

Also, we bought a desk (over $2500) and a chair (under $2500) for our current house. He is primarily a W2 employee that works from home because the company doesn't have a designated office space. Can these expenses be considered either an asset or expense? I would not want to depreciate the desk, I would rather just have the one time deduction.

[AnnetteB6]

During the period of time that your husband was a self-employed person being paid with a 1099, you may have home office expenses if the space was used regularly and exclusively for the Schedule C self-employed business.  You would enter the home office expenses as part of the Schedule C and only claim expenses for the 7 months that he was self-employed.  

You mentioned that there was minor 1099 work done after the first 7 months of the year, but that he was now an employee as well.  If the same office space was used for the self-employed business and the work as an employee, then the full office space is no longer being used exclusively by the self-employed business and does not qualify as a home office under the Schedule C.  You would need to reduce the square feet of the space to 'share' it between the Schedule C and the W-2 income.

Then, after you move to your current home, you need to determine if the Schedule C business is still using a home office, or if this business is no longer active.  If it is still using part of the home office, then the space needs to be divided between the Schedule C and the W-2 use so that each can claim exclusive use of a portion of the space.

After he became an employee being paid with a W-2, the work from home portion of the home office expense is no longer a deduction on your Federal return.  Because he is now an employee, this would normally fall under being able to claim Employee Business Expense on Form 2106.  However, Form 2106 and Employee Business Expense has been suspended for tax years 2018 through 2025 due to the Tax Cuts and Jobs Act passed in 2017.  You are still able to enter these expenses as part of your Federal return in case your state did not conform to the Federal change, but it will not affect your Federal return.

As for the desk and chair, under a normal Schedule C home office situation, those would be entered as Assets and you could choose whether to depreciate them over time or write off the total cost in a single year.  With your situation of the space possibly being shared between a Schedule C business and W-2 work from home, the Assets would be entered in both places with the cost divided between the two home office spaces.  

[brankga]

Regarding the office desk...what if we paid a deposit for the desk in 2022 but because of life circumstances and not moving into our current house until 2024, we paid the remaining balance in 2024. Can we deduct the deposit paid in 2022 since we didn't receive the desk until 2024???

[AnnetteB6]

Yes, the cost basis for depreciating the desk would include the deposit and the remaining balance, in other words, the total cost of the desk would be depreciated starting on the date you placed it in service for the business.

@brankga