Home Office deduction on 1120S

[dominion]

Can anyone tell me where you place the home office deduction on an 1120S. Only 1 per owner/employee in S Corp. I want to use the Safe Harbor Method. What if I want to use the New Safe Harbor- where you can claim up to $1500.00 ($5.00 per sq ft up to 300 sq ft)?
Thanks,
Matthew633

[ATSMAN]

Can anyone tell me where you place the home office deduction on an 1120S. Only 1 per owner/employee in S Corp. I want to use the Safe Harbor Method.
Thanks,
Matthew633

This is a problem for sole owners of a Sub S who are also employee. Read pub 587.

If you are an employee and you use a part of your home for business, you
may qualify for a deduction for its business use. You must
meet the tests discussed earlier plus:
Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.

So basically you are deducting mortgage interest and property taxes plus PMI if applicable on Sch A if you itemize.

You could file 2106 (as the employee) and take the OIH deduction there subject to the 2% income threshold.

[TaxGuyBill]

The corporation does not have a "home" so there is no "home office" for the corporation.


There are several ways to do it, but I would recommend the shareholder/employee submit a monthly expense report under an accountable plan to the corporation. Some may disagree with me, but to me that seems the least problematic. The corporation can reimburse the proportionate expenses of the home, such as mortgage interest, property taxes, utilities, repairs, etc.

[oceanlovin'ea]

different thought

I was told the s corporation can reimburse employee/shareholder for expenses of operating an office in their home. That would include utilities, insurance, security, and other maintenance costs. Since mortgage interest and real estate taxes can be deducted on Schedule A and are not really "operating" expenses those can't be part of the reimbursement.

If I was told wrong, please let me know. It would be of benefit to my clients to be able to take the other deductions too.

Linda, EA

[geekgirldany]

I am with Linda. That is how I have been doing it for years. Never included the mortgage interest or property taxes.

[ATSMAN]

What if you don't itemize?

Would you say the accountable plan should reimburse for that?

[Lion]

It's really the expenses you would not have had if you did not have OIH. You would've had mortgage interest and property tax. But, your electricity and heating would've been lower if you were out of the house at your employer's office, home insurance less than reporting OIH to your insurer, etc.

[AZ-Tax]

Very Good Point

What if you don't itemize?

Would you say the accountable plan should reimburse for that?

Atsman has a very good point. National Society of Accountants has interesting thread about this same topic just last week. One of the members posted she recommends to the single S-Corp shareholder to use form 8829 for the S-Corps template for the accountable plan.