Edited: This is the proper answer. First off, the % time must add up to no more than 100%, prorated between the two offices. But there's more than that. TT, at least the 2015 version, will NOT calculate the home office deduction correctly unless you take additional steps. I noticed that when I entered 25% and 75% for my home offices (prorated) for a year when I moved, TT disallowed the total deduction for the 25% office and marked it as carryover. However, the total income for the year minus expenses should have easily allowed the entire home office deduction. But putting in 25% makes TT severely limit the allowed deduction because TT takes 25% of gross income and then subtracts ALL of the business expenses for the year (instead of just 25%), which then may not allow any leftover overhead for the home office deduction.
(Business expenses cannot exceed income or the home office deduction will not be allowed. For example, if income is 150,000 and expenses are 100,000, entering 25% in the time in office field will calculate an income of 37,500 (25%), but then TT will subtract the entire 100,000 in expenses instead of 25,000. This improperly leaves no room for home office deduction for that office.)
Technically, under a 'moved during the year' scenario, TT should calculate 25% of the gross income AND 25% of the total deductions in this scenario, not 100%, but it doesn't...... that is, until the final error checks where it finds blank line 7's on the forms. If a taxpayer has *one* home office for the year, but just changed addresses, this is different than a taxpayer that has 2 separate home offices for the year, which is the way TT always calculates it, and I'm not so sure that's correct because TT automatically assumes the balance of admin work outside of that office is at a non-deductible location and it shouldn't assume that.
To correct this, populate the % time in each office fields correctly with proration (yes, it TOTALS 100%), then go to forms view, forms 8829 (one for each home office) and look for line 7 which will be blank. Take the % time for that office and multiply it by line 6, which are the total expenses for the business. For instance, if the % time in that office is 25%, multiply line 6 by 0.25 and put the resulting number on line 7. Do the same for the other home office(s). TT will then properly calculate the allowed home office deduction. Even better, TT should reprogram their software to account for this phenomenon natively to properly calculate line 7 if they have not done so already.
And by the way, for years TT has been telling business owners that if 50% of their business is in the field, such as a plumber who is working in people's homes 50% of the time, they should put the home office business use as 50%. This is incorrect. What the IRS wants here is the percentage of ADMINISTRATIVE work for the business conducted in the home office, which is 100%. I cannot tell you how much money I lost over the years because of this mislead from TT. Here is what the IRS publication says: "John is a self-employed plumber. Most of John's time is spent at customers' homes and offices installing and repairing plumbing. He has a small office in his home that he uses exclusively and regularly for the ADMINISTRATIVE OR MANAGEMENT ACTIVITIES of his business, such as phoning customers, ordering supplies, and keeping his books." You're welcome.
