my schedule c has a net profit, but turbotax says I don't qualify for the home office deduction because I had a net loss

[VolvoGirl]

If you are not showing a loss on Schedule C.
Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year. And you have to answer yes to both questions about exclusive and regular use, not just one. The area of your home office must be used regularly and exclusively for business to deduct it.

Or you checked the box on 32b saying Some Investment is Not at Risk.

If you have money not at risk you can not take a loss on schedule C. If you don't know what it means then probably All your Investment is at Risk (check Box 32a). It means you are using your own money for the business. People usually check the wrong box.

[KrisD15]

Do you have a profit after Self-Employment tax is paid? 

Can you tell us what is on Schedule 1 Line 3.

HERE is how to view your tax return 

[woodford_bruce_a]

Thanks KrisD15. The amount on Schedule 1 line 3 is $101,814. Thanks for the link to view the tax return, but that only works for the 1040 form. In order to view Schedule 1, I had to pay. I went ahead and paid, since I'm going to have to do that anyway, and my taxes are ready to file (except for this home office deduction issue).

[woodford_bruce_a]

@KrisD15  @VolvoGirl  thanks to both of you for your responses.

I went ahead and paid so I can look at the forms. Form 8829 line 8 has a value of -$16,272. But Schedule C line 29 has a value of $102,976.

Form 8829 line 8 reads "Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home, minus any loss from the trade or business not derived from the business use of your home." This might as well be written in Greek, but that's the IRS for you. In any case, I don't understand how Turbotax is getting from $102,976 to -$16,272. Would that imply a loss from the business not derived from the business use of my home in the amount of $119,248? I don't understand how Turbotax comes up with this number. Thanks in advance for your help!

[KrisD15]

Did you sell any business assets? 

[AnnetteB6 · Accepted solution]

The profit/loss number that is used to decide whether the home office expense is allowed comes from Schedule C line 7 minus Schedule C line 28.  If the result is positive, then that is the first step to get the simplified home office deduction.  

However, the Business Conducted in the Home Office comes into play too.  If that number is not entered, then it is assumed to be zero.  Zero times the income on Schedule C line 7 minus Schedule C line 28 gives a negative number, which means no home office deduction in the current year (carryover if using actual expense method).  

If the Business Conducted in the Home Office percentage is any number less than 100%, then the amount on Schedule C line 7 is adjusted by that percentage before the expenses are subtracted.  So even with what you expect to be a positive profit situation, the percentage of business conducted in the home office can drop the income to a level where the profit is negative instead of positive.  This means that the simplified home office method is not allowed.  If this is the case, using the actual expense method can work, but the home office expense is carried over to a future year.  

@woodford_bruce_a 

[woodford_bruce_a]

Thanks so much @AnnetteB6! As I continued looking into this last night, I realized that is what is going on.

[golfperfect1]

Where does the "Business use of home office" percentage mentioned in a prior answer come from? I checked the box in turbotax deluxe that says "I do all of this business from home." Assume I have gross business income of 10,000 and business expenses of 8,000 (supplies, etc, but not utilities or mortgage, etc.) for a net profit of $2,000. Yet Turbotax says I have no profit and the turbotax worksheet shows -$8,000 income. Still confused.

[golfperfect1]

I meant to say "business conducted in the home office" percentage, and I am using the simplified method.

[AnnetteB6]

It should come from the box that you checked stating that all business is conducted in your home office.  However, there have been some unusual experiences with this amount using certain versions of TurboTax.

When you go through the Federal Review of your return, this error will be flagged and you can enter the amount on that review screen.  The amount to enter is the percentage of time that you spend in your home office making money for your business.  If all of your time is spent working in your home office for your business, then enter 100%.

You can also make the correction to the calculation using Forms Mode.  Use these steps:

• Click Forms on the top row of TurboTax.
• Go to Form 8829.
• Scroll to the section titled Line 8 Calculation Smart Worksheet and enter your percent of business use of the home office on line B.
• Click Step-by-Step at the top of the screen to go back to the input screens.

@golfperfect1

[golfperfect1]

Thanks, I’ll use that workaround!