A domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation. If the LLC is a partnership, normal partnership tax rules will apply to the LLC and it should file a Form 1065, U.S. Return of Partnership Income. Each owner should show their pro-rata share of partnership income, credits and deductions on Schedule K-1 (1065), Partner’s Share of Income, Deductions, Credits, etc.
Here is a common strategy sometimes used by partners: (Claiming an office in the home follows.)
Under the general rule, a partner is not allowed to deduct partnership expenses on his or her own individual tax return. However, an exception applies when there is a provision in the partnership agreement requiring the partner to pay the expenses, or if payment of the expenses is a routine partnership practice tantamount to an agreement.
Allowable expenses are deducted on Part II, Schedule E (Form 1040). Report allowable unreimbursed partnership expenses as a separate item from partnership income on line 28, Schedule E. Enter "UPE" as the name of the line item, then list the amount on (h) of line 28. The expense will be deducted from partnership income and will also reduce net income subject to self-employment tax.
Enter your partnership K-1 information in TurboTax. As you go through the screens entering your information, you will eventually come to a screen entitled "describe your partnership". Be sure to check the box "I am required to pay supplemental business expenses...." (See the attached screenshot below. Click to enlarge.) You will be prompted to enter your expenses once this is done.
Alternatively, the partnership could reimburse you and deduct the reimbursement. If done at the Government mileage rate for only business miles, it wouldn't be shown on your return. If reimbursed under some other method, you would report the expenses reduced by the reimbursement.
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