Home Office

[RNuse09]

I have a client who has a home offiice they meet all of the requirements. My question is can I just allocate the utilities and take depreciation, I would like to leave the mortagage interest and real estate taxes as sched a deductions. I don't want to allocate the mortagage interest and eal estate taxes becasue of the 2% floor, We will be benefiting mostly from the pa and local return for this. Anyone ever do this?

[Gary2]

For employees, you must use the worksheet in Pub. 587. Presumably your software implements this worksheet, one way or another.

You don't lose the full deduction of the mortgage interest or real estate taxes because of this worksheet - they're deducted in full on the same lines as usual - but they do factor into the income limit on the office in home deduction.

[Burke]

I find that in my software (ATX), you must use the OIH worksheet associated with Sche A, rather than the one associated with Sche C, or Form 8829, and when you do, the mtge int and taxes do not enter onto the worksheet, as they are already taken in full on the preceding lines. Check it out in yours.

[taxea]

In ProSeries the 8829 links from the Sch C and does the allocation to Sch A for interest and taxes based on the sqft of the office and storage space input on the 8829.

Not allocating for the office portion takes 2% from the entire Sch A expense amounts rather than a dollar for dollar amount taken on Sch C F8829.

[Burke]

In ProSeries the 8829 links from the Sch C and does the allocation to Sch A for interest and taxes based on the sqft of the office and storage space input on the 8829.

And mine does this as well if a Sche C is involved. From the OP, it was inferred that there was no Sche C, just an employee's OIH, taken under Misc Deductions on Sche A.

[krav]

8829?

So - what about a self-employed Sch C - are we required to take the mortgage interest and property taxes on 8829? This is a new client who has had losses for many years on a business that might be a tough sell on the business vs. hobby issue. If I could at least take those deductions on sch A, she'd break even instead of a loss. thanks!

[ddoshan]

As far as I know there is no law that says you have to actually claim your office in the home expenses period. But if you do, then I believe you would be required to enter the mortgage interest and taxes on the form 8829.

Point being, maybe you do not want to claim any office in the home expenses.

[taxea]

And mine does this as well if a Sche C is involved. From the OP, it was inferred that there was no Sche C, just an employee's OIH, taken under Misc Deductions on Sche A.

If I remember right it will also link to 2106. I know I have done it in the past.

[Burke]

Yes, it will link also from 2106 if there is a reason to fill out that form, such as mileage, etc.

[Burke]

So - what about a self-employed Sch C - are we required to take the mortgage interest and property taxes on 8829? This is a new client who has had losses for many years on a business that might be a tough sell on the business vs. hobby issue. If I could at least take those deductions on sch A, she'd break even instead of a loss. thanks!

If you complete 8829 for a Sch C, you will note that int and taxes percentage amt will flow thru to the Sche C-OIH deduction even if there is a loss. The rest will be suspended. The balance of int & tax will go to Sche A. You will have to run the numbers to determine if this is an advantage or not. You do not have to use OIH deduction, but you can't pick and choose what to put on the form. Take state issues into consideration as well. Sometimes I force itemizing because of the state even if it is below the federal standard deduction.