Home Office Deduction

[SCswede]

As a potential self employed Podcaster, trying to decide the proper tax treatment for a possible home office:

(1) can you use a walk-in closet as the primary home office for Podcasts three to four days a week for about three hours each day and an outside location for one or two days a week, for also about three hours on those days? (2) Since the home is the primary place of business, on those days that the Podcast is at the outside location, can you deduct mileage for those days?

A Schedule C would be prepared and would probably use the simplified method of for the home office deduction (walk-in closet; up to 300 Sq. Ft). 

Thanks for any input on this confusing topic.

[AnnetteB6]

If the closet space qualifies as a home office and your principal place of business, then yes, the mileage from your home to the other location would be considered to be business miles.

Any space in your home can be considered to be a home office based on the square feet of the space.  It does have to meet the regular use test and exclusive use test to be a qualified home office.  This means that the closet cannot also be a closet.  It must be exclusively used as an office space in order to claim all of the square feet of the closet.  

Take a look at the following TurboTax help article to learn more:

The Home Office Deduction
 

[SCswede]

Thanks for the input. In the process on Turbotax Deluxe of claiming the home office deduction using the simplified method by completing Schedule C. I've entered some business expenses including mileage, supplies and cell and internet costs (about $1,400) to offset the revenue earned ($6,200) as an independent contractor; net profit is about $4,800 after deducting the expenses. Then followed the prompts for the home deduction using the simplified method and told that a home deduction is not allowed because "the net profit was zero or less" which is clearly incorrect. Form 8829 indicates that the Simplified Method smart worksheet line 2A Gross Income Limitation reflects the amount of the expenses ($-1,400) of the business noted above not the Total income or net profit of the business of $6,200 or $4,800 respectively. Is this amount being tied to line 28 instead of line 29 of Schedule C?

Am I doing something incorrectly or is this a bug in the program?

Thanks for any input.

[DawnC]

You need to go into Forms mode and enter the percentage of time you spend conducting business in that office.   If you run a review, you should get an error and be allowed to enter the percentage.   But you can go and enter it directly on the form before you get the error.   Go to Forms mode and Find Form 8829.   Scroll down to Part ll - Figure Your Allowable Deduction - Line 8.  On Line B, enter the percentage.    The Deluxe version skips the necessary question in the interview, so you need to manually enter it if you are not using the Home & Business product.  

[SCswede]

Thanks Dawn; Followed your directions and the correct net profit amount of the business from Schedule C was reflected rather than just the expenses of the business which created a business loss and thereby not eligible for the home office deduction.

Also when I ran error check, Form 8829 Asset Entry W/S got flagged and asked for information on line 1 (Description of asset), 2 (Date Acq) and 4 (total cost when acquired) none of which made sense to me since it was a closet converted to an office which was part of the main house which was purchased years ago. To eliminate the error I made some estimates of that required information, Description (Closet), Acquired, the day the business started this year, and $100 for the cost of the closet (???); and the errors were resolved.

I guess my point is that there should be a simpler way to get this done when using the simplified home deduction method.

Any thought or additional comments are always appreciated. Thanks again Dawn.

[SCswede]

I'm getting ready to file the returns and the more I research the home office deduction the more confusing it seems when it comes to the Form 8829 Asset Entry Worksheet. Since I'm using the simplified method for the home office deduction, does this Asset Entry Worksheet even apply or mean anything? I don't believe it gets attached to the Schedule C and is only for my records; is that correct?

If so, what is the proper information to enter on lines 1 thru 4? Do I use the date I purchased the house or when I started using the office? Is the cost of the asset the cost of the house or an estimate as to the cost of the portion of the house used as the office? Any help is appreciated. Thanks.

[RobertB4444]

The reason that the system is asking you those questions is that you qualify to depreciate the percentage of the house that is your home office.  So you're entering information there about your entire home.  And you already entered the information about the percentage of your home that you use for your office.  So the system will then figure out whether you should get a depreciation deduction for your office or not.  

So enter the date that you bought the house and the total value of the house and all of that in there.  

@SCswede 

[SCswede]

Thanks Robert; but just so I understand your response, I thought getting a depreciation deduction is not allowed if using the Simplified Home Office Deduction Method which is what I'm using. Am I missing something? Thanks.

[RobertB4444]

No, you're not missing anything, you're exactly right.  You're going to take the simplified method and none of this will matter.  But the system has to check and see if the actual expenses are better for you.  So it has to ask these questions.

@SCswede 

[SCswede]

Thanks Robert.