Two businesses, one home office

[Stephanie59]

I'm working on 2021 taxes (yes, I filed an extension)

I have two businesses (Technical Editor/DTP and Notary/Notary Signing Agent) and work from one home office. I'm good with the home office expenses that seem to be split between the two, but what about the Common Business Expenses? Health insurance?  My thought is to include the cost only for one business. Same with the cell phone expense.  My plan was to claim health insurance under the editing business and the cell phone expense under the notary business as it would be used mainly for the notary business (same with car expenses listed elsewhere in TT). The notary business had a severe loss as I was homeless after selling my house. While I've been a notary for several years, the NSA is new to 2021, and I had to purchase desktop and portable printers and scanners. I lived in a hotel until the end of the year and had no room to set up my printer and scanner and no room to work, even if I was able to do so. Now that I bought a house, I can work in that business. I don't think not being able to do the NSA business is relevant to where I put the cell phone and car expenses.

Thoughts?

Thanks. ~Stephanie 

[Mike9241]

unless the health insurance is for employees it does not go on schedule C. your health insurance should end up on schedule  1 line 17 if any portion is deductible otherwise schedule A. there should be a question as you go thru that schedule about your own health insurance. the reason is that SE health insurance does not reduce your self-employment taxes and is limited to net SE income. if you have improperly taken the deduction on schedule C in prior years' you have understated your tax liability and should amend.

as for other expenses, any logical method for allocating them is fine. That would include the home office deduction. 

[jpicardi13 · Accepted solution]

I would maximize the expenses on the company that had the profit to avoid or reduce your Self-Employment taxes and get the non-profitable business as close to breakeven as possible.

As the expenses can only be deducted once, posting a portion of them (posting them) on the non-profitable company will only increase that loss.  Self-Employment taxes are based on a % of the profit and will always be $0 on a company with a loss.  On the other hand, the company that has a profit FICA / Self-Employment taxes, as a % of those profits.  You cannot offset the losses from the "non-profitable" against the profitable business, when calculating Self Employment taxes, each business stands on its own.  So, you will wind up pay extra self-employment taxes on the profitable business.  

Your justification can be that the non-profitable business could not afford to pay these bills, s the profitable business covered them. 

[Critter-3]

When entered correctly as a Sch 1 deduction the total of both Sch C businesses combined is used to limit that deduction so you cannot simply choose to apply it to any one Sch C under your name.

[VolvoGirl]

Self-employed health insurance deduction goes on Form 1040 Schedule 1 line 17 (which goes to 1040 line 10), as long as the expense is not greater than your Net Profit on schedule C individually. If the Insurance is more than your Net Profit on each of your Schedule Cs you can split it up and enter it on each schedule C so you don't go over the net profit on either one.  If it does exceed your net self-employment income it gets split automatically. An amount equal to your net self-employment income goes on Schedule 1 and the remainder gets added in to medical expenses on Schedule A.

[VolvoGirl]

@Critter-3   I didn't see your post while I was posting mine.  Is that for Health Ins?  My notes say you can split it.  Maybe I have a FAQ link or employee post about it.  

[VolvoGirl]

Ok I tried it in my Desktop program.   Have a net profit on Sch C #1 of $200 and a loss on  #2 of 300.  So a combined Net Loss of $100 to 1040.  

I entered 900 SE Health Insurance under #1 and it gave me a deduction of $200 on schedule 1 and the rest to schedule A.  

[Stephanie59]

Ok. So, the next question is, should I not claim the supplies and printers/scanners at all or claim them under the other business? They were purchased for the notary business.  And the mileage as well. 

And back to the health insurance. If it had a profit, would I claim the insurance for both businesses or the one with the highest profit? I'm a sole proprietor for both. No employees.