As a Stock Trader with home office can I report my Capital Gains on line 8 Sch C along with my Home Office expenses , instead of Sch d ?

[samiabusaad]

That's what I thought, thanks

[samiabusaad]

This is a separate question, but I would appreciate your thoughts if you do know the answer.  I maintain two residences, each has an office. Can I claim two home office deductions for the same business? I spend about 60% of my time at one, 40% at the other?

[NL]

Hi,

As a trader with Trader Tax Status, I still can't get Turbo Tax to accept my Home Office Expense (as gains are in Sch D and expenses are on Sch C).  Turbo Tax states due to no income in Sch C, i can't deduct Home Office?

Am i doing something wrong? Or do i just calculate Home Office Exp and include separately as a Misc Exp in Sch C?

thanks. 

[NL]

Hi Colleen,

Thanks for your help.

To confirm:

a. Regardless of 475 election, annual trading gains/losses are reported on Sch D and expenses on Sch C.  The main benefit with 475 election is that is helps remove $3k cap loss limitation and Wash Sale rule.  The election of form 475 should have no impact on deducting business expenses, correct?

b. When preparing Sch C (as the gains from annual trading sales are in Sch D), Sch C shows no income.  Therefore, I can't deduct Home Office Expense.

Any way to get around this and would you know why this happens?  Should I calculate Home Office Expense and include as Misc Expense in Sch C?

Thanks.

[jorgito153]

Hi, Did you found out how to report home office expenses when there is no income on Schedule C. I know the rules of reporting income on 4797 line 10 and expenses on Schedule C when a mark to market election is timely made. I have the same question as you had. I cant deduct home office expenses because there is no income on Schedule C. nobody answered that question that day. 

[Anonymous]

your choice

A)

set up a schedule C to link the HO to. then type 8829 into the search box. there should then appear a list of 3 items click on the first and link the schedule C. 

or B)

type 8829 and then clicking on the first item in the list. you'll be asked to set up a schedule C. 

[DNMH]

It seems that no one really answered the question.  If a day trader,  shows expenses on Sch C and income on either Sch D or 4797 (if making the mark to market election, then business use of home will never be allowed unless there is a way to move those expenses directly to the Sch C instead of using the 8829. 

[WendyN2]

Yes, you can accomplish this, and below is a link to some very valuable information for your unique self-employed status and related forms of income/expense. This is no easy task as it is relatively new and hence why I am sending you to the Journal of Accountancy link as the information is up to date as of late Fall, 2020.

Day Trading And Self Employment - J of A

[DNMH]

HI,  Thanks for the link.  I've already read the article.  If you, as a trader, make the mark-to-market election, you claim income from trades on the 4797, there is no wash sale allowance, there are deemed sales as of 12/31 of ea. yr and expenses on the Sch C.  If no mark-to-market election, then trades on Sch D, limited to $3000 total loss/yr and expenses on Sch C.  We're still back to the same question.  No Sch C income. 

[emayteetea]

Did anyone get the answer yet?

[AnnetteB6]

In order to claim home office expenses as a trader, you will need to be using a CD/downloaded version of TurboTax because there is an entry that will be required to be entered directly on a worksheet in Forms Mode.

After you have set up the Schedule C for your trader business, you can enter your business expenses including the qualified home office expense.  Initially, the home office expense will be disallowed until it has been determined that you have an overall gain attributable to your business. 

If you have not elected and submitted the Mark-to-Market (MTM) accounting method, then go to Forms Mode to view your Schedule D.  Line 16 of Schedule D will show the overall gain or loss being reported on your return.  If you did not report any transactions during the year as an ‘investor’ and Schedule D shows only your gains/losses from being a ‘trader’, then line 16 is the amount you use in the home office instruction below.  Otherwise, you must do some math outside of your return to determine only the overall gain/loss from transactions associated with your business as a ‘trader’.  Transactions as an investor (for example, selling a long-term holding) cannot be considered to be income associated with your business as a trader.

If you have elected and submitted the MTM accounting method, then go to Forms Mode to view your Form 4797.  If you have no other items reported on Form 4797 except for your trader activity, then the ‘trader’ gain is the amount from line 18b.  Otherwise, you will need to calculate the total gain for your trader activity only to use in the home office instruction below.

For traders who claim a home office on their Schedule C, a manual adjustment must be made to show that the trader business had a gain for the year.  Otherwise, the home office deduction is disallowed.  Use the following steps to make that manual adjustment:

• In Forms Mode, go to Form 8829
• Scroll to the Line 8 Calculation Smart Worksheet
• Enter the ‘trader’ gain amount (referenced in the instructions above) on line C2

In addition to the home office expense, all other business expenses will contribute to the Schedule C showing an overall loss since the income from trading is not reported directly on Schedule C.  With an overall loss on Schedule C, no self-employment tax will be imposed.

@emayteetea

[emayteetea]

@AnnetteB6

Thank you for the reply! That sounds like it will work.  I’ll have to try it within the next week. You’re awesome and thank you for sharing 🙂

[greggd29]

I’ve read every article out there, there is no blueprint for how to actually get the “meatiest” part of the home office deduction!   No Sch. C income, no square footage deduction - period!  The utmost expert in this area, GreenTrader, hints at a they’re advising clients but wisely didn’t provide the step by step guidance on HOW to move “some” income over to Sch C (enough to balance the expense).  That might both reduce a red-flag (a Sch C with no income) and allow for the square footage deductions.  

Sounds to me like the  IRS never “fixed” this catch-22 and traders with TTS will have to live with this giant red-flag and be forced to make declarations of WHY it’s not really red.  Why is that OUR JOB????   Do your job !!!!!!

[DNMH]

Hi,

I want to thank everyone who has responded.  Here is what I did and feel very comfortable.  

Until a trader requests the mark to market election, which they may never decide to do, all of their trades ultimately end up on the Sch D, the wash sale rules apply and they are limited to the $3000/yr loss.  

The expenses they may have like subscriptions. software, hardware, etc go on a Sch C.  Securities traders are not subject to SE tax on net income and they may qualify for OIH deduction despite not having net income on the Sch C.

On Part II of the 8829, line 8 calculation smart worksheet, line C, is where you will put the net profits, if any, from Sch D so the OIH deduction will be allowed.  I didn't see this at first as I have a bad habit of skipping over the worksheets. 

I hope this helps! 

[dayt8er]

Thank you so much for helping to get the home office deduction. My other question is how to get the child dependent care FSA deduction included? My wife works full time and I'm full time day trader. She made the max FSA deduction for our child care, but it's now disallowed because I don't have "income". This is still the case even after I made the modifications for home office. Any suggestions on how to manage that?