Home Office Deduction for multiple business

[Auto]

I have a client who has a consulting business (single member LLC) and an S Corp. Both businesses are run from the same home office. Do the home office expenses have to be split between the two businesses? Such as, the S Corp (as an employee) taking part of the deduction as a Misc on Sched A. And the LLC taking part of the deduction on the Schedule C.

[taxmandan]

I have a client who has a consulting business (single member LLC) and an S Corp. Both businesses are run from the same home office. Do the home office expenses have to be split between the two businesses? Such as, the S Corp (as an employee) taking part of the deduction as a Misc on Sched A. And the LLC taking part of the deduction on the Schedule C.

Don't you have a problem with qualifying the office expense with regard to exclusive use? Same office space, two businesses, doesn't seem to be exclusive to me.

[Gene V]

I have a client who has a consulting business (single member LLC) and an S Corp. Both businesses are run from the same home office. Do the home office expenses have to be split between the two businesses? Such as, the S Corp (as an employee) taking part of the deduction as a Misc on Sched A. And the LLC taking part of the deduction on the Schedule C.

Yes, see Pub. 587 page 5

More Than One Trade or Business

[Auto]

still exclusive

I don't have a problem with it being exclusive. The room is exclusively used for business, just for two businesses, same owner. I've read Pub 587 which states exclusivity must be determined seperately for each business. So the premises qualifies. What it doesn't refer to is accounting for the percentage of use for each business. Am I nitpicking figuring out the proportion of use for each business? After all, the Schedule C is a much better deduction than the Sched A.

[barzillai]

TTB p. 5-15 suggests setting up an accountable plan for an S-Corp run out of a home office. Otherwise, not all of the expenses are deductible. Also, make sure both businesses qualify for the deduction. If one doesn't, you lose it for the other one as well.

[Auto]

loss of FICA tax reduction

Thanks for the reference to TTB p 5-15. Taking the deductions through the S Corp as a deductible plan seems like a good way to go. Although his S Corp income will be reduced, he will be losing the deduction on his Schedule C income to reduce his FICA tax. I would still like to know if both the Sched A and the Sched C needs to be prepared proportionately for each business. I can't find any written reference to that question.

Does anyone know if both Schedules need to be prepared with the home office deduction shared proportionately for each business?

[taxmandan]

Yes, see Pub. 587 page 5

More Than One Trade or Business

I wasn't sure that the use of the office for a corporation would meet the standard but it does according to the pub. Thanks for posting the reference, I was too lazy, I mean busy, to look it up myself.

[Auto]

conclusion

Per IRS (accuracy always questionable). The home office deduction does have to be split between the Schedule A and the Schedule C.