Home Office Deduction - not allowed. Seems like an error

[ctbimmer]

Working on my 2025 Federal taxes, in Schedule C, my wife and I have two separate businesses, both run from the home, 100% of the time.  So we have two Schedule C forms.

We both elected to take the simplified method home office deduction (we supply sq ft for the office and total size of the home).  I use a different part of the home but used the same method.

She was allowed to take the home office deduction, but mine says my net profit was negative, which it is not. My line 29 (tentative profit or loss) is positive. Why is this happening and is it a bug in the software?

[AnnetteB6]

Since you have already entered one home office successfully, you are familiar with the questions and answers in this section.  The information below explains a common reason that the simplified method does not work for some people.  Review your inputs and if you need further assistance, please respond with any additional information such as any error messages you see onscreen and which version of TurboTax you are using.  

As you go through the Home Office section of your Schedule C, you should see several questions, first to qualify that you can claim a home office, then the details about the home office, and then the actual expenses related to the home office.  It is the details about the home office that is probably causing the issue with your return.  Look for the following questions, each on a separate input screen:

• When did you start using this home office?
• Do you use space in this home to store inventory or product samples?
• How big is this home office?
• Business conducted in home office
• How did you enter home office expenses for 2024?

The question on the page titled Business conducted in home office is the key to the simplified office expense calculation.  If you have not entered a value on that page, or if you do not see that page as you go through the Home Office section, then you will not be able to use the simplified method because your business will not show a profit even if there is one.

[ctbimmer]

Thanks for the feedback. 2025 was the first year of income "under this business". In a prior tax year (2023), I lumped my income in on my wife's Schedule C, but 2025 I had more income and expenses and decided to break it out.  Also, now that we get 1099s under our SSNs rather the business EIN it made more sense to split.

I originally entered 1/1/25 as first day used for business, I entered 12 months and 100% of  (which I don't believe I was asked on wife's Schedule C interview).

I do not have inventory or samples, the home is 3800sq ft. I entered 300 for my wife's office, and a separate 300ft space for mine.  As I did not have any self-employment income in 2024, that question is moot. I answered "no" to expenses to deduct from a prior year.  I still don't understand why no deduction.

I did try changing the "first date used" to 4/1/23, as I did have self-employment income in 2023 but it did not change the result.

[ctbimmer]

Also, this is Turbotax Deluxe on Mac

[AnnetteB6]

Based on your description of your inputs, the only thing left that may prevent you from claiming home office expenses could be the amount of other business expenses.  There may not be enough profit left over to allow the home office expense to be claimed since home office expenses are not allowed to take the business into a loss situation.  

If you are willing to provide a diagnostic copy of your tax data file, I can take a closer look to see what is going on with your home office expense to determine if there is something that needs to be corrected.  The diagnostic file is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Desktop/Download Versions, Mac:

1. Open your return.
2. Go to the Menu at the top of the screen, select Help.
3. Then, “Send Tax File to Agent” 
4. Please provide the Token Number  (including the dash) that was generated in the response.

@ctbimmer 

[ctbimmer]

Thanks. File sent. Token is 

13563577522314029-79171077

[AnnetteB6 · Accepted solution]

Thank you for sending your diagnostic file and providing the token number.  I was able to take a look at your return to see what is happening.  There is an input required for the home office that does not seem to be going to the right spot to allow the home office expense.  I will follow-up with this and report it to the development team.  

In the meantime, here are the steps you can take to get your return ready to file.  Bear with me, some of them might not make sense.  

1. Open the return and go to Forms so that you can see the actual forms included in your return.  
2. Look for Schedule B on the left side of the screen.  Under the Schedule B, there is a Form 8829.  Highlight the 8829 and delete it.
3. Deleting that form under the Schedule B will remove the home office for your wife as well as the one under Schedule B.
4. Go back to the step-by-step mode and select either Schedule C business to work on (yours or your wife).
5. Go through the home office section again, but this time, when TurboTax automatically fills in your address for the name of the home office, change it to something else (Wife's Home Office, Taxpayer's Home Office).  The names of the home offices need to be different from one another.  
6. If you do not see a question as you go through this home office section that asks what percentage of time is spent in the office, then you will likely see the message again that the home office does not qualify due to income from the business. 
7. If you get the home office deduction for this first home office, then repeat steps 4-6 for the other Schedule C business to add the home office.

If you did not see a question regarding the percentage of time spent in the home office, then follow these steps to enter that information:

1. Go to Forms again.
2. Look for Form 8829 (the name you gave the home office you just entered) on the left side of the screen and highlight this form.  
3. Scroll down the page to the section titled Line 8 Calculation Smart Worksheet.  It will have a box around it.
4. Type 100 in the box on line B.
5. This will then calculate the home office deduction.

@ctbimmer 

[ctbimmer]

Annette, thanks!  This worked.  Deleting both form 8829's and re-entering didn't work at first. I did my wife's Schedule C and got the result I'd been seeing -- no deduction because no income.  

I then went to her copy of 8829 and put in the 100% amount as you said in the last section -- it worked. Did the same for me, and now we both have the home office deduction.  Thank you!