Your Home office expenses seem high compared to yo...
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Level 2

Your Home office expenses seem high compared to your income.

I entered my home office space, 173 sqft out of 3,000sqft, and got an $865 deduction. When I finished going through my other deductions I got the message from TT saying "Your Home office expenses seem high compared to your income. Sometimes this happens - it's OK to claim this amount as long as the expenses are allowable and you have receipts or other documentation that shows how much you spent on these expenses." (This part is what worries me)

 

I am self-employed and received a 1099-NEC. I live in my mother's house, paid for and owned by her, but have taken a separate bedroom and turned it into my home office. It is used solely for my work, 6 days a week for the last year, and only by me. I do not pay to rent for this space as my home office nor do I pay for any utilities in the home office.

 

Can I still add it in and get a deduction for it?

11 Replies
Level 2

Your Home office expenses seem high compared to your income.

You are fine.  It is just pointing out that you have a lot of home office expenses compared to others who report the amount of income you are reporting.

Level 3

Your Home office expenses seem high compared to your income.

TT is using the simplified method for the home office deduction $5/sq ft. 

 

 

just make sure in your using 1099-NEC form it's linked to the schedule C. 

Level 15

Your Home office expenses seem high compared to your income.

you can only deduct actual expenses you have.  From your description you don't have any expenses.  

 

what expenses do you have that  you are deducting? Can you show them if audited? 

 

the $5 / sq foot is just a simplified approach to collecting lots and lots of invoices and doing a multitude of calculation to reflect actual expenses you really have.  But you have to have the expenses!

 

Level 15

Your Home office expenses seem high compared to your income.

@NCperson      No, if you take the office space deduction, that number could be larger than your actual expenses.

It is an option available to you on your tax return.

Level 15

Your Home office expenses seem high compared to your income.

@fanfare - here is the link for the simplified method from the IRS

 

https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-dedu...

 

one of the requirements is that 

 

"Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes"

 

the room is not used exclusively for his home office; it doubles as @Jusdreiin's bedroom and therefore he cannot use the simplified method.  Therefore, the only expenses he can deduct are his actual expenses. 

 

best, 

Level 2

Your Home office expenses seem high compared to your income.

@NCperson 
The home office room is used exclusively as my office. I have a separate bedroom that I use as my sleeping area. So I take up two rooms in the house.

 

My concern is that I don't pay any expenses for the use of the home office so I'm wondering can I claim a deduction for it.

Level 15

Your Home office expenses seem high compared to your income.

@Jusdreiin now I am confused...here is what you stated originally: 

 

"have taken a separate bedroom and turned it into my home office".

 

that reads as one room used as both a home office and a bedroom. 

 

Regardless, 

 

Please review the IRS FAQ's and specifically question 7.  Note that you can use the simplified method in lieu of actual expenses, but that is the problem - you don't appear to have any actual expenses - which is what drives the question that TT asks: 

 

https://www.irs.gov/businesses/small-businesses-self-employed/faqs-simplified-method-for-home-office...

 

Q7.  Can actual expenses related to the qualified business use of the home be deducted for a taxable year in which the simplified method is used?

A.  No.  You cannot use the simplified method for a taxable year and deduct actual expenses related to the qualified business use of the home.  The amount allowed as a deduction when using the simplified method is in lieu of a deduction for your actual expenses.

 

As I noted, the simplified method is just a way to eliminate a lot of the mathematical drudgery caused by a lot of small expenses.  As the question in TT infers, you still need to have the expenses; it's just the method of summarizing them that is simplified.   You haven't stated that you actually have the expenses, so there is no deduction to be had. 

 

 

Level 2

Your Home office expenses seem high compared to your income.

@NCperson 

The room was previously an unused bedroom, but I changed it into my office in December 2019, when I became self-employed. I have a separate bedroom for sleeping.

 

I understand the simplified method. I think you answered my question. Since I have no expenses for the office I can't get a deductible for it. Thank you!

Level 15

Your Home office expenses seem high compared to your income.

If you have a room dedicated as an office, you can use the sq. footage option.

You just have to be able to show the IRS that it is a dedicated room, if asked to do so.

Level 15

Your Home office expenses seem high compared to your income.

I think you don't have a deduction because the room it not in your home, but someone else's.

Level 15

Your Home office expenses seem high compared to your income.

@fanfare - I think the issue is, it is his home as it is where he lives, but he doesn't have any expenses to support the deductions.  Otherwise someone who rents at fair market could not deduct office expenses as it is not his home either- it is someone else's. 

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