The office at the shop where hubby builds our product was not sufficient. We bought a portable building to use as an office at home. How would I claim the home office ded

[OfficeVolunteer]

We don't currently pay rent or a lease on the building we use, as we're technically sharing it, plus will need to start paying for the business we purchased beginning 2019. The office in this building had no insulation, was rat "infested" (to me anyway), space heaters weren't very effective, nor was the window unit air conditioning. I was miserable while at work. My husband owns the business, and decided to take on a "rent-to-own" building to place on our property at home. I used pallet boards, canned spray foam and poster boards (to make insulation panels) for insulation. 1. How do I claim the home office deduction here? (We use electricity tie-in from the main house, but other than that, the office has dedicated fax line and cable internet. We use cell phones as our business lines and is completely separated from the house. There's no plumbing in the office, but it's close enough for me to walk to the restroom in the house.) 2. How do I claim all of the products I purchased and used, in order to make this office usable and "outfit" it? 3. Can I claim the "Rent-to-own" payments as a deduction? If so; how?

[MichelleT]

Just FYI Home office allows up to 300 square feet to be claimed.

[OfficeVolunteer]

Nice! So, I guess I could use the spare room inside the house where I screen print our boxes and promotional products, as a second "home office"?

[MichelleT]

oh yes!!  and if you don't take standard deduction you may use more than 300sf.  You can deduct the office area as well as storage and prep areas.

[OfficeVolunteer]

Nicer! Honestly, this is making that -$9,000 federal number at the top left of the page a lot less horrifying!

[MichelleT]

Yay!!  you can take 13.55% of the home for office use if you itemize. So if I have a home that is 3000sf, I can deduct expenses for 407 sf

[MichelleT]

Just keep chipping away!!  go through every little thing in this buss section and I bet you will find things you didn't know about or forgot about.

[OfficeVolunteer]

This is my second day at it for 12+ hours, and the more I hammer at it (figuring things that I hadn't yet), the more comfortable I am with the whole process. I've used TT since they first came out online, but this is my first experience with anything "business". My most frustrating issue, is that when moving offices, a lot of "proof" was lost, so there's stuff I can't claim. Plus, having to go through 3 bank accounts (1 personal, 1 business "transition" until we get everything straight, and 1 "official" business account. Or DBA account to be technical.) to find all of the business transactions. Can't make hubby stay off the card. He wants; he gets, and uses whichever bank has funds *eye roll*.

[OfficeVolunteer]

I do have another question, however. The percentage calculation: I put 50% for home office. However, I don't know if that's entirely true. I take orders online at home, I keep sales records, I handle customer service, I get him the orders, I screen print our logo on our boxes and other "complimentary" items we send with the orders inside our home, I do the accounting in the office, I print shipping labels in the office, etc. etc. He builds the orders that I give him, then brings them to the home office, for me to weigh and drop off. Does this sound like it should be more than 50%? The products he builds requires way too much machinery for him to build them here as well, or I'm sure that would be the case lol

[MichelleT · Accepted solution]

You will add all your utilities, your insurance, office expenses, supplies, internet, cable for the entire household, etc.

Then go through the entire home office and business section.

There are many deductible expenses besides home office.

Home office may end up being more beneficial to take the standard deduction, or it may be best to use all your expenses instead. You will just have to have everything added up and put it in and let the program decide for you.

Post your questions above if you need me, I am educated well in this area.

Your Home office Deduction is under your Schedule C.

Go to:

>Business, at top 

>I'll chose what I work on, 

>Business Income & Expense, 

add a business, 

go to >Business Expense, 

>Home Office.

rent paid is under >Other Common Buss Expense>Rental.

 For a complete list of allowable Business Deductions:

 From <https://ttlc.intuit.com/questions/4240394-may-i-deduct-basic-telephone-expense-as-a-utility-expense-...> 

From <https://ttlc.intuit.com/questions/4256001-where-can-i-find-the-home-office-credit?jump_to=similar-qu...> 

[Carl]

I question you claiming a home office for that portable building. If it's portable, then it's not taxed by your local taxing authority that assesses property taxes. So the portable building itself is a business asset that is listed as such in the Business assets section. It's not a home office, because that portable building is not taxed by your local property tax authority. Therefore it's listed as a business asset and is depreciated over 40 years just like any other major business asset. You will not be claiming a home office per-se, because you are not using any space as a home office, that you pay property taxes on.

Your cost basis for this asset will be your total purchase price of the portable building plus the cost of what you put into it to insulate it, wire it up with electricity, water, gas or whatever other utilities that were installed in the building after you placed it on your property.

For the utilities utilized in the building you can figure that based on what your utility costs were before the building was hooked up. Basically, total up your 2016 utility costs and get that figure. Lets say for example, it cost you $3000 in 2016 for water and electricity in your house for a year. That averages out to $250 a month.

Now add up your utility cost for the months after you installed the building. Lets say you got things fully operational Jun 1st of 2017. So add up your utilitiy costs from Jun through Dec of 2017. Lets say that total for those 7 months comes to $2,100. Over 7 months that averages out to $300 a month. That's a 20% increase on average, per month.

So for 2017 your business expense for utilities would be $50 a month, or $350 for those last 7 months of 2017. Then for 2018, figuring that your utility cost will not be exactly the same of course, you can figure 20% of whatever you spend in your household for utilities, to be for the business.

You already know how to add the business as a business asset that will be depreciated over 40 years. So here's how to set this up in TurboTax for the utilities side of this equation.

Work through the business profile section and select the option to indicate "My business has a different address" and continue. For the street address just add an "A" to the end of it (since it's your home address) and that will be fine. For example, if your address is 123 AnyStreet Drive, make the address for the business 123A Anystreet Drive. If par chance any mail is actually addressed to 123A Anystreet drive, the post office will still deliver it to 123 Anystreet Drive. So that's really  not an issue.

Now, when you get to the Business Expenses section, in the sub-section for "Other Common Business Expenses" there's a category for utilities. That's where you'll enter that percentage of your utility costs that will apply to the business.