home office deduction

[pangho]

Dear TurboTax Community,

I have a question about home office deduction and hope someone with expertise can help me. I am an independent consultant who receives income via 1099. My wife works for a company in Boston and receives income via W2.  We both live and work from home in California. In the past, I only claim one office for myself with the TurboTax Home and Office version.  I am now semi-retired and my income is low, I understand home office deduction is only for 35% of the income. In this case, shall I also claim another office for my wife since she is not retired and has a much higher income? Can someone receive the W2 claim home office? I know Turbo Tax Hone and Biz asks if the home office is shared with another person. Is this the option to use for this purpose?  Is there a better option n in TurboTax H&B for someone with W2 to claim a home office? 

Thank you in advance for any suggestions and help.

Pang Ho 

[AnnetteB6]

For tax years 2018 through 2025, there is not an option for a W-2 employee to claim home office expense on their Federal return.  That would be part of employee business expense, which was suspended by the Tax Cuts and Jobs Act passed in 2017.  

The employee business expense is entered on Form 2106 as part of the Federal return.  Some states (such as California) did not conform to the Federal change.  This means that you can still enter home office expenses for your wife (if qualified) to claim the home office.  The information may provide a tax break on your state return, but it will not change your Federal return.

Since you work as an independent consultant, you can claim a home office as part of your Schedule C, if qualified.  One qualification is that your home office be used regularly and exclusively for your business.  Be certain that the space you share with your wife as your home office has been divided between each of your areas and that you are only claiming the square feet of your part of the space.

[grimsfield]

I have a question in response to the last answer.

It seems the only place to enter the home office information is on the federal return. This affects the california return, but it DOES also seem to affect the federal. Which is clearly not right. What is the right way to enter this information so it doesn't come to bite us?

[MonikaK1]

Entering home office expenses on Schedule C will affect your Federal return. It's only the ability to claim them on Schedule A as Employee Business Expenses that was suspended by the Tax Cuts and Jobs Act. 

If you are an employee, you still enter employee home office expenses in the Federal return section of TurboTax, under Employment Expenses, but they won't affect your Federal itemized deductions. You can only get a deduction for them on a state return for a state that didn't follow the change to the Federal law, such as California.

See this TurboTax tips article for more information.

[pangho]

Thank you Monika for you response.

[grimsfield]

Hi Monika,

First, thanks for the reply. 

Unfortunately, unless there has been a software update to this area of TurboTax in the last week, I don't think what you are saying to do is accurate. I've tried to do that already and it does in fact add the deductions to the federal return.

I believe the correct place to enter these deductions, while still in the federal return, is actually "Other Deductions and Credits" within the sub-section "Other Deductible Expenses". Unfortunately, we are forced to do all the proper calculations here ourselves and it is quite hard for someone unfamiliar with California tax code.

If I am wrong about this, please let me know. Otherwise, please pass on my request for an update, so this is a bit easier and less confusing next year.

[MonikaK1]

If you have a Schedule C business, and you have a version of TurboTax that supports business expenses, you can enter home office expenses in the business section.

If you are an employee, you enter home office expenses under Deductions and Credits, Employment Expenses (for Desktop), or Job Expenses for W-2 Income (for Online). There, you won't get a deduction on the Federal return but the information flows through to the State return if you prepare a return for a state that still allows Employee Business Expenses.

TurboTax provides step-by-step instructions for the home office calculation, and the option to use the simplified method.

The titles and organization of the different deduction sections vary by the version of TurboTax used.

If you have a different experience, please provide more details as to where you entered the information and where you are seeing it on the Federal return.

See this help article for information on entering the home office information. Answer the questions in TurboTax rather than making a calculation first.

Please see this TurboTax article and IRS Publication 587 for more information on the deduction for business use of a home.