I retired in June after many years with the same employer. From July-December I got a business license and worked as a consultant for the same company, on average 8-12 hour a week and received a 1099-NEC. One room of our rented apartment was my dedicated office. Can I claim a home office deduction for the % office portion of rent/utilities for July-December?
If so, would I have been required to send a 1099 to my landlord for the rent $ (given the rent is being deducted as a business expense)? or is this only for goods/services? Thanks in advance.
Can I claim a home office deduction for the % office portion of rent/utilities for July-December? Yes you can.
If so, would I have been required to send a 1099 to my landlord for the rent $ (given the rent is being deducted as a business expense)? No you don't.
The self-employed are eligible for the home office tax deduction if they meet certain criteria. The workspace for a home office must be used exclusively and regularly for business.
@Critter-3 Is 8-12 hours a week considered regularly?
Thanks Critter-3 and SweetieJean,
On the question of time spent.......... I also used the home office for management of 9 rental properties (all outside US and listed on schedule E) for which i am involved in decisions/management together with local property managers.
Time spent on rental properties was approx an additional 4 - 8 hours per week (so primary office use was for 1099 consulting work). Thanks in advance for your feedback.
Some things aren't well clarified on the home office deduction for "regularly and exclusively" here's my interpretation/understanding.
- If you regularly use the space for conducting any percentage or portion of your business, then it qualifies. The space must be 100% business use. Now you may only use that space 5 hours a week. But if that one hour is for business use *ONLY* and nothing else, then it's 100% business use. So the business use percentage of the space must be 100%. Anything less than that, and you don't qualify to claim the home office.
- The percentage of business you actually conduct in that home office may be, and can be less than 100%. For example, in my computer consulting business I conduct about 70% of my business on site at the client's location. The other 30% is spent in my home office doing internet research, getting pricing from vendors, billing clients, and other general business book keeping tasks.
So while the office is used for business only, 100% of the time it's occupied, I only conduct about 30% of my business in that office.
Thanks very much Carl, I really appreciate your insights.
Quick follow up....... I have 2 businesses (1099 consulting and management of rental property I own). I use the home office for both consulting and rental property management. Is it best to claim the home office, under the business for which home office is primarily used/majority of time, in my case the consulting? Or should home office deduction be split based on hours in each business (in my case average of 10 hrs per week in consulting and 4 hours property management)
Long term residential rental property which is reported on SCH E, is not eligible to take a home office deduction. So that should make things easier for you.
Typically, someone who owns three or less long term residential properties does not meet the qualifications to claim a home office. There are some exceptions if the owner is a qualified real estate professional that earns a majority of their income working in real estate (and meets other requirements) and while not uncommon, one doesn't see that very much.
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