Why is the Home Office deduction not working properly?

[Steven-T]

I said yes to all three questions, said yes to the 15 days, gave the square footage, said yes to the simplified question.  Everything you have posted would have this be an eligible deduction.  It doesn't seem to be working correctly.  Unless there is another requirement that you didn't mention.

[CherylW · Accepted solution]

If you show a loss on your Schedule C, you're not allowed the deduction.

This, from IRS' page on Simplified Option for Home Office Deduction:

Deduction cannot exceed gross income from business use of home less business expenses.

[Steven-T]

Thank you.  Turbo Tax doesn't mention that in there write up about why it's not allowed.

[DF1invest]

That information is not accurate. The ability to claim the home office deduction is not dependent on whether you show a profit or a loss on your Schedule C. Let’s clarify the key points:

1. Home Office Deduction Eligibility:

   • To qualify for the home office deduction, you must meet specific criteria related to your home office space.
   • These criteria include:
     • Exclusive and Regular Use: You must use part of your home regularly and exclusively for business purposes.
     • Principal Place of Business: Your home office should be your primary place of business, where substantial administrative or management tasks occur.

2. Profit or Loss Status:

   • Whether your business shows a profit or a loss does not impact your eligibility for the home office deduction.
   • The deduction focuses on the use of your home space for business activities, regardless of financial outcomes.

3. Consult a Tax Professional:

   • If you encounter any issues or have questions about claiming the home office deduction, consider consulting a tax professional.
   • They can provide personalized guidance based on your specific situation.

Remember, the home office deduction is a valuable tax benefit for self-employed individuals. Keep advocating for your legitimate claim, and seek professional advice to ensure accurate reporting. Best wishes as you continue building your business! 🌟🏢💼

[DF1invest]

Certainly! Let’s break down what that statement means:

Home Office Deduction Limitation:

The phrase “Deduction cannot exceed gross income from business use of home less business expenses” refers to a limitation on the home office deduction.

Here’s what it entails:

Calculation:

When claiming the home office deduction, the amount you deduct for home office expenses (such as rent, utilities, etc.) cannot exceed your gross income derived from the qualified business use of your home.

Gross income here refers to the income generated from your business activities conducted within your home.

Business Expenses:

The deduction is further reduced by any business expenses that are unrelated to the qualified business use of your home.

These unrelated expenses are subtracted from your gross income.

Carryover:

If the calculated deduction exceeds your gross income, the excess amount cannot be deducted in the current year.

However, you can carry over this excess to future years and apply it against future income.

Remember, consult with a tax professional to ensure accurate reporting and to maximize your home office deduction. May your business thrive, and may your home office serve you well! 🌟🏢💼

For more detailed insights, you can refer to the IRS Home Office Deduction guidelines123.

[VolvoGirl]

If you are not showing a loss on Schedule C.

Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year.  And you have to answer yes to both questions about exclusive and regular use, not just one.  The area of your home office must be used regularly and exclusively for business to deduct it.

Or you checked the box on 32b saying Some Investment is Not at Risk.

If you have money not at risk you can not take a loss on schedule C. If you don't know what it means then probably All your Investment is at Risk (check Box 32a). It means you are using your own money for the business.  People usually check the wrong box.