Home office and vehicle use

[mactoolsix]

I believe that if the s corporation decides to reimburse shareholder/employee for expenses and the appropriate minutes are recorded, it would be perfectly acceptable for the s corp to reimburse her for use of space in her home as well as mileage expenses.

Linda, EA

She could deduct mortgage interest and property tax on Sch. E without an accountable plan, however deductions for utilities, repairs and other home expenses can not be deducted (§280A(c)(6)) without setting up an accountable plan (appropriate minutes Linda referred to) that would allow reimbursements for these expenses.

Mike

[oceanlovin'ea]

Mike

Mike, I didn't realize you could deduct mortgage interest or real estate taxes on page 2 of the Schedule E. Is it just listed as Unreimbursed Expenses? I have never done that.

Linda, EA

[mactoolsix]

Mike, I didn't realize you could deduct mortgage interest or real estate taxes on page 2 of the Schedule E. Is it just listed as Unreimbursed Expenses? I have never done that.

Linda, EA

Have the S-Corporation pay rent to the shareholder for home office space and have the shareholder claim the income on their individual return on Schedule E. So far, the net effect to shareholder is zero because you have rent expense on the Corporation and rental income on the Schedule E. Next pick up a percentage of mortgage interest and property tax on the Schedule E; however, that is already deductible on the Schedule A, so really the only real benefit would be other expenses like insurance, utilities, repairs, and maintenance, which would normally not be deductible.

The problem is that 280A(c)(6) does not allow anything but mortgage interest and property tax on the Schedule E in this situation, so you set up an accountable plan and have the S-Corp reimburse the shareholder monthly for the portion of utilities and other expenses for the rented home office. That way the reimbursed expenses are claimed on the S-Corp return and no longer blocked by 280A(c)(6).

The rental income from the S-Corporation is ordinary income and not passive.

We enter the Rents, Repairs etc on 1120S lines 9-13, utilities line 19 "other deductions"

Claim the allocated expenses on the individuals 1040 Sch. E as usual for rental properties.

Was that the question?
Mike