Home office deduction

[pmazzara1]

I am an independent contractor contracting with different companies (three separate 1099s).  One of the 1099s is for income derived from activity conducted solely from my home.  The office is in a small section of a guest bedroom with a desk and computer and is not used for anything else.  We might have a guest that stays there on average once a year. If I read the rules correctly, I should be able to use the home office deduction for the portion of the bedroom I use as an office on only the 1099 income that I use the office for.  So my question is...how do I determine the percentage of my business conducted in the home and how do I enter that in TurboTax?  I understand that the area of the bedroom exclusively used as an office divided by the total area of the home is the portion of the home used for business, but what about the portion of my business conducted exclusively in the home?  For example, if 100% of my income from one of the 1099s is derived from business performed in my home but that constitutes 10% of my total income, how do I factor that in? Do I have to create two separate businesses and two Schedule Cs, one with the home office and one without?

[AnnetteB6 · Accepted solution]

No, you should not create two separate businesses to account for the home office situation.

When you claim a home office for your Schedule C business, the calculation includes a percentage of time that the home office is used to generate income for your business.  So, you will need to determine how much time is spent using the home office to generate the 10% of your total income as compared to the time spent generating the other 90% of income.  The percentage of time is then used to determine any limitation that needs to be applied to the home office deduction.

As you go through the home office section in TurboTax, you should see a question asking the percentage of time spent conducting business in the home office.  This is how you will account for not using the home office to earn all of your self-employed income.

You may find that the percentage of time spent in the home office is not great enough to make an impact on your return.  If this is the case, then you will see a message that you will not be claiming a home office deduction.  If you have entered actual expenses rather than using the simplified home office calculation, then the home office expense will carry forward to a future year.