Got incorrect "The net profit for your Real estate work was zero or less, which means you can't claim any home office deductions" under Simplified deduction with positive profit

[galaxy-explorer]

Hi, 

I use the TurboTax online version, I answered the following question and choose Simplified deduction, but got the message "The net profit for your Real estate work was zero or less, which means you can't claim any home office deductions" with a positive net profit (see the screenshots below).  This looks similar to https://ttlc.intuit.com/community/tax-credits-deductions/discussion/turbotax-does-not-allow-home-off... 

When did [Name] start using this home office for work?
01/01/2025

In 2025, how many months did [Name] use this office at least 15 days?

12

What percentage of [Name] 's work for Real estate was done at this home office?
100

 

[RogerD1]

I tried a mock return for a business with a profit and a home office deduction in the online TurboTax and got the deduction.  Here are the entries I had for it after clicking the pencil icon on the Home office summary screen:

• Did you have more than one home office in 2025? No
• Did any of these situations apply to your home office in 2025? None of these apply
• The office name screen is next
• Was the home office used for work only and nothing else? Yes
• Did you regularly use this home office? Yes
• Was the home office the primary place where you work? Yes
• Based on this info, you qualify for the home office deduction screen is next
• When did you start using this home office for work? 01/01/2025
• In 2025, how many months did you use this office at least 15 days? 12
• What percentage of your work for [business class] was done at this home office? 100
• What was the size of this home office? 120 sq. ft in a 1500 sq. ft home

The next screen shows that there is a $600 home office deduction.  If you answered the questions the same as I did on your return, the home office deduction should be allowed.

If you are still having difficulties after checking these steps, I would recommend sending us a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

[galaxy-explorer]

Thanks! I did exactly the same on those steps, but still got the message. I sent a diagnostic file following the instruction and the Token number is 1353063.

[RogerD1 · Accepted solution]

The token your provided shows that a business vehicle that you were using for this work experienced a loss when you sold it.  This loss on the sale of the vehicle offsets the self-employed income on Schedule C completely.  Because of that, since a home office deduction can only be used to offset income from the business and there is no income to offset, then the home office deduction is not allowed.

A tip for you to consider:  If you use actual expenses for your home office and the deduction is disallowed, those unused home office expenses can accumulate and be used to help offset future business profits.  If you use the simplified method, any unused home office expense is lost forever.  While it is more work to figure the actual expense deduction, it is frequently larger than the simplified deduction and has the ability to have the unused expenses carried over.

[galaxy-explorer]

@RogerD1 that makes sense! I did not realize it because the vehicle loss did not show up on the following page when it calculates the taxable income, but looks like it offsets that taxable income and end up negative net profit. Thanks a lot for the tip as well!