Business-use-of -home S-Corp

[rwm221]

I have a client who has an S-Corp, for which he is the only employee. He wants to claim business-use-of-home since his S-Corp is run from his house. Plus he has a loss. The person who did his taxes last year put down office expense and put the business-use-of-home there. I haven't found where I can legally use

business-use-of-home for an S-Corp with a loss. Please help.

[ATSMAN]

The S-corp can pay rent for the business use portion of the home. The corporation deducts as rent expense. The homeowner recognizes it as rent income.

Generally S and C corps have an Accountable Expense Reimbursement plan to handle these type of expenses, including other bus expenses incurred by the employee such as mileage, travel etc.

[TAXNJ]

because of Section 280A limitations, the disallowed deduction due to the loss of the s-Corp, the deduction would carry-over to subsequent years and could be deducted to the extent of S Corporation net income in those years.

also, a brief summary video of section 289A if interested:

https://andersonadvisors.com/section-280a-deduction-explained/

[rwm221]

So because he has a loss fir the business he cannot use the business use of home.

[Rapid Robert]

Does he even have enough basis to deduct the loss, even without taking OIH into account?

[TaxGuyBill]

A corporation does not have a "home", so therefore no direct Home Office deduction.

As ATSMAN indicated, there are 3 options for a potential deduction (and I don't think there are limitations because of the loss):

(1) Set up an Accountable Plan where the shareholder submits the Home Office expenses every month to the corporation, and the corporation reimburses that amount. In my opinion, this is the best option. But you can't retroactively do this. Start it now.

(2) Have the corporation rent the office space from the taxpayer. But as was mentioned, the taxpayer will need to report that as rent. But you can't retroactively do this.

(3) The shareholder is an employee, and claims office space as an employee as an Itemized deduction. But this is no longer deductible on the federal return. It MIGHT be deductible for your state, BUT it likely will have the 2% limitation and need to Itemize. So it likely won't save anything.


In short, there is nothing you can do now (except maybe for #3), but set up the client for doing things right.

[TAXNJ]

Additional information for tax research to support your decision to compare when reading reply posts:

https://www.hhcpa.com/blogs/income-tax-accountants-cpa/office-in-the-home-deduction-limitations-for-s-corporation-shareholder-employees/

[TaxGuyBill]

Additional information for tax research to support your decision to compare when reading reply posts:

https://www.hhcpa.com/blogs/income-t...der-employees/

Thanks for the correction, I guess it seems like the 280A limitation would apply *IF* there were any deduction. But unfortunately, it seems like no Accountable Plan or rental agreement was done, so there is no deduction anyways (and therefore nothing to carry forward).

[TAXNJ]

Thanks for the correction, I guess it seems like the 280A limitation would apply *IF* there were any deduction. But unfortunately, it seems like no Accountable Plan or rental agreement was done, so there is no deduction anyways (and therefore nothing to carry forward).

Thanks. Not a correction.

Just information for Original Poster to compare for various options (if applicable) and to advise client going forward.

As you know, better to know what to reference if they take a position.