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PsyDanny1
Returning Member

Home office deduction on one business using two home offices in same house

I want to make sure I am clear on proper entry for home office expenses.  Earlier in the year I used a small space in the basement for some administrative activities, with the pandemic shut down I moved to an unused bedroom  to provide telehealth services.  So this year there are two home offices in the same home, with different utilization (space/square foot and time used).  No problem dividing that up with Business Conducted in Home office (25% of year down, 75% up) resulting in 1.5% and 74.25%.  No problem with basic business expenses, but the problem is proper entry of variables from my one Mortage Statement.  Do I merely enter the full amount of Property Tax, Mortgage Interest, and Homeowners Insurance from my statement, as well as utilities from my Quicken report and let TurboTax divide it, or do I have to enter the 25% portion from one and 75% proportion for the other, given that these are entered in TurboTax as two different offices?

4 Replies
Carl
Level 15

Home office deduction on one business using two home offices in same house

First, and mainly for others reading this thread, let me make it clear that job related expenses, including a home office are not deductible for a W-2 job. I am assuming you are self-employed.

Let's say for example, the original home office was 5% of the floor space in your home, and you opened the new home office on Apr 1 2020 consisting of an additional 5% of the floor space.

What you will do is close the old home office on Mar 31st.

Then you will open a completely new home office on Apr 1, where the total square footage is 10% of the total floor space. Just make sure the close date of the old home office does "NOT" overlap the open date of the new home office. Then the program will "do the math" for you based on percentage and close date of the old office, and percentage and open date of the new home office.

So your 2020 tax return will have two home offices listed on it, for the same business.

 

PsyDanny1
Returning Member

Home office deduction on one business using two home offices in same house

I am a Psychologist that operates as an LLC, getting 1099-NEC from the contracting clinic.  Business use of home has changed.  The one office used 4.46% space,  comprising 6% of my business for 25% of the year (Jan-March).  With the pandemic, moved to a bed room for second space using 6.47 space, comprising 99% of my business for 75% of the year.  So it looks like I have to close the first  - where do I check to make sure I did that?  But then will it show two different offices or one?  And the main thing is proper entry and accounting for the home office expenses - utilities, homeowners insurance, mortgage interest, and property tax paid.  Are those entered once using the entire amount on the mortgage statement or do I have do divide them by the 25% and 75%.  Obviously I want to get the proper deductions for business and whatever carry over there may be to Schedule A deductions.

Carl
Level 15

Home office deduction on one business using two home offices in same house

So it looks like I have to close the first - where do I check to make sure I did that?

Simply work through the old office and when asked "Did you stop using this asset in 2020?" select YES, and continue working it through so you'll enter the date you closed the office, and anything else the program asks you for pertaining to that home office.

 

But then will it show two different offices or one?

You'll have two home offices listed. The old one you closed, and the new one you opened. If you did not use the $5/sq ft deduction in lieu of depreciating the old office, make sure you keep track of that depreciation already taken on that home office. it "will" come into play at some time in the future and you will *need* to know the total of all depreciation taken for all home offices as some point in your future.

 

Carl
Level 15

Home office deduction on one business using two home offices in same house

Almost forgot:

Are those entered once using the entire amount on the mortgage statement or do I have do divide them by the 25% and 75%.

I would suggest you elect to option to "do the math" yourself manually, and enter the amounts appropriate for each home office for the percentage of floor space and percentage of time used during the year, for both home offices.  Though I don't know it for a fact, I seriously doubt the program can "correctly" do the math since both percentage of floor space used, and percentage of time during the year for each home office will be different.

 

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