Home Office

[BastaPa]

I work from home and have had some office expenses. 

I fill out the home-office questionnaire on TurboTax - which was quite time-consuming (needed lots of data).

In the end, there was NO change to my tax liability. 

I talked with a friend of mine who is also using TurboTax; she has a much lower income than mine, but the result was exactly the same as mine, i.e., no impact.

Is TurboTax working properly? 

Thank you.  Patrick. 

[AnnetteB6]

TurboTax is working properly. 

It could be that the combination of income attributable to your home office and the other business expenses are limiting your home office expenses. 

If the home office expenses are limited and not allowed to be taken on the current year’s return, then they are carried forward to the next year as long as the actual home office expenses were being used and not the simplified method based solely on the square feet of the office. 

There are some examples below that will illustrate this limitation a little better.

Income Earned from Home Office

The IRS limits the total of certain kinds of home office expenses - the ones you would not be able to deduct anywhere else on your tax return, such as your utilities and repairs - to the income earned from activities in your home office. Although these expenses cannot themselves create a loss on your business, you can carry over any unused portion to next year's home office deduction.

Here's how it works. Let's say

 - Your business income before any expenses was $10,000

 - All business expenses that would not limit your home office deduction were $4,000, and

 - The home office expenses were $3,000

1). If 90% of your income came from business conducted in your home office, then you can deduct all of your home office expenses:

 - $10,000 X 90% of income from the home office = $9,000 from business use of the home

 - $9,000 - $4,000 other expenses = $5,000 available for home office expenses

 - $5,000 is greater than $3,000 home office expenses, so you can deduct all of them.

2). However, if 60% of your income came from business conducted in your home office, then your home office expenses will be limited:

 - $10,000 X 60% of income from the home office = $6,000 from business use of the home

 - $6,000 - $4,000 other expenses = $2,000 available for home office expenses

 - $2,000 is less than $3,000 home office expenses, so you can deduct $2,000 of them this year, and carry the remaining $1,000 to next year.

3). In addition, if 30% of your income came from business conducted in your home office, then you would not be able to deduct any of them this year:

 - $10,000 X 30% of income from the home office = $3,000 from business use of the home

 - $3,000 - $4,000 other expenses = $0 available for home office expenses (this will never be less than zero)

 - You cannot deduct any home office expenses this year, but you can carry the entire $3,000 to next year.

[BastaPa]

Annette:

To avoid confusion, let me share some numbers with you:

- income of over $100k

- 100% of income from home office

- 10 months of office use for income

- home expenses calculated via TurboTax questionnaire:  approx. $3,000

Yet, $0 Home Office expense is recognized. 

Patrick. 

[AnnetteB6]

The starting point for the home office limitation is your net business income after all other expenses (other than the home office) have been taken into account.  The home office deduction cannot put your business into a loss situation.  

Your situation still may be limited based on your net income instead of your gross income of over $100k.

@BastaPa

[BastaPa]

Well, since I could not understand why my home-office expenses resulted in no change in my tax liability, I followed the forms to see what is going on.  And I might have found the answer.  At the end of the calculation, it says to transfer my home-office expenses to the forms for my partnership or S-Corp... which I don't have.  I have a W2 for my remote work, and therefore my home-office expenses have nowhere to go to be considered deductible...  A big effort to calculate these expenses - leading to no impact.  Oh well... 

[ErnieS0]

The Tax Cuts and Jobs Act suspended the home office deduction. Employee job expenses are no longer deductible on your federal return.

TurboTax will transfer your info to your state return if your state allows such deductions.