Where do i enter simplified home office deduction if my business income is reported on a K-1?

[IreneS]

Is the K-1 from a partnership or S-Corp?

[IreneS · Accepted solution]

UPDATED FOR TAX YEAR 2019

The home office deduction depends on whether the K-1 came from a Partnership or an S-Corp.  The simplified deduction for your home office is $5 per square foot, up to 300 square feet. The deduction for an office that is 200 square feet would be $1,000.

Partnership.

If the K-1 is from a partnership, does your partnership agreement require you to pay office expenses out of your own pocket?

• If yes, you will need to calculate the expenses and enter them into TurboTax.
• If no, you won't be able to take a deduction for office expenses.

After you have calculated the expenses for your home office you can go through the Schedule K-1 entry.  To enter the K-1 and the related home office expenses, please follow these steps:

1. Click on Federal > Wages & Income
2. In the S-Corps, Partnerships, and Trusts section click on the box next to Schedule K-1.  
3. Click Yes on the next screen, Did you receive any Schedules K-1?
4. On the Tell Us About Your Schedules K-1 screen.  Click on the Start/Update box next to the type of entity (partnership, S-corporation, or trust/estate) that issued the K-1.   
5. If you have already entered K-1 information, you will see a Summary screen.  Click Add Another K-1 to enter your information  (or click on Edit to continue with the existing form entry).  
6. If you haven't started entering K-1 information, continue through the screens, entering the requested information.
7. When you come to the screen, Describe the Partnership, select the box  I am required to pay supplemental business expenses . . .   
8. On the Unreimbursed Partnership Expenses screen, click the blue Yes box.
9. On the screens that follow you will be asked about vehicle expenses, assets, and other categories of expenses.
10. When you get to the Miscellaneous Supplemental Expenses screen, enter the allowable expenses for the business use of your home from the worksheet you used from IRS Pub. 587 - Business Use of Your Home.  

S-Corporation

TurboTax PatriciaV explains: 

If Schedule K-1 came from Form 1120S, S corporation shareholders generally cannot deduct unreimbursed business expenses with Schedule K-1 because the shareholders are categorized as employees when performing services for the corporation (and a corporate officer may be considered a statutory employee). 

These expenses, if not subject to reimbursement from the corporation, are unreimbursed employee business expenses treated as miscellaneous itemized deductions subject to the 2% of the adjusted gross income (AGI) floor.  However, with the Tax Cuts and Jobs Act (TCJA) this deduction has been eliminated on the federal return.  However, you still may want to enter it in case it is allowable on your state return.

In this case, enter the home office expenses under Deductions & Credits > Employment Expenses > Job Expenses for W-2 Income.

For more from the IRS, see: S Corporation Employees, Shareholders and Corporate Officers

[Edited | 3/18/2020 |  12:22 pm PDT]

[AzeeK]

Hi Irene, my K-1 is from an S-Corp. 
I have an LLC  which will be treated as S-Corp for taxes. I had setup an accountable plan for reimbursement of business related expenses to the employee.  

I am the S-Corp officer, and I want to deduct the cost of home office expense that has been reimbursed to the  S-Corp officer under accountable plan.  Can I use this deduction if I am renting an apartment and using 1 room as office space ? 

Would I be able to use $5 per square foot or just a % of total home expenses ?  Please help

[Critter]

If Schedule K-1 came from Form 1120S, S corporation shareholders generally cannot deduct unreimbursed business expenses with Schedule K-1 because the shareholders are categorized as employees when performing services for the corporation (and a corporate officer may be considered a statutory employee). 

These expenses, if not subject to reimbursement from the corporation, are unreimbursed employee business expenses treated as miscellaneous itemized deductions subject to the 2% of the adjusted gross income (AGI) floor.  However, with the Tax Cuts and Jobs Act (TCJA) this deduction has been eliminated on the federal return.  However, you still may want to enter it in case it is allowable on your state return.

In this case, enter the home office expenses under Deductions & Credits > Employment Expenses > Job Expenses for W-2 Income.

For more from the IRS, see: S Corporation Employees, Shareholders and Corporate Officers

[AzeeK]

In this case, as I mentioned above, home office deduction is a reimbursed business expense.
What I am asking is there any conflict using this deduction ?

[Critter]

If you are RENTING space to the corporation for remuneration then it is reported on the tax return on the Sch E and then the business % of the expenses can be deducted.