Home office deduction

[EJ at Dads Dollars and Debts]

Quick question- Doing some turbo tax data entering and it seems like I am going to get a huge home office expense for my blog business. I had a $1.2 million dollar home and used one room exclusively for my blog business (home office). Turbo tax is giving me some high amount - like $34k for home office deduction. I did make some money on my site and am glad to take the deduction but it seems exorbitant.

Anyone else have similar experiences?

 

[DMFA]

Using the simplified square-foot method?

Hmm. I mean, technically, I think it follows the rules, but that does seem a bit absurd, doesn't it? I'm not sure if the IRS folks have anything better to do with their time, but I'd think someone paying nearly $3,000 a month for an office as a blogger might raise an eyebrow. But I'd defer this one to an accountant or tax lawyer tbh.

[cgossage]

While that may be a large deduction, those are he rules, so you should take advantage of them. As long as you followed the rules appropriately you will be fine.

[MPMD]

not an expert on this but it sounds like at audit you could really make a case that you only used that room for your blog?

also i don't think there's any rule that your biz has to make money right? essentially you are saying that you are renting a very expensive office for a side biz that "isn't doing very well" at least if it were your only source of income. i'm assuming that the income from your blog is less than $36k/year but if i'm wrong then bully for you!

[ENT Doc]

Was the gross income more than the expenses and home office deduction amount?

[cgossage]

You can’t deduct more in home office expenses than your income derived from the business. I’m assuming Turbo Tax knows that and is handling it correctly but worth double checking.

[lost]

1) Simple method- $5 per square foot, Maximum 300 square feet.

2) Regular method- Percentage of home used for business.

https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction

$34 K deduction......I feel it will be hard to swallow for IRS.

[EJ at Dads Dollars and Debts]

Good advice all around here. Not simple deduction...I did the regular method. It was a room all onto its self. Not used for anything else. We had to do some roof repairs, so that also gets thrown in there per turbo tax. Putting it as $3k a month seems a bit crazy...so will likely need to look into this.

No my blog did not make $36k...closer to $3k but as someone said, can deduct losses also.

Thanks for the advice!

[adventure]

I did the simple method for my job this year - quite a bit less than 34k.

[cgossage]

If it’s for your blog make sure the deduction is flowing through your Schedule C and not Misc Itemized Deduction on your Schedule A. A Home Office expense isn’t allowed to exceed income from your home business.

[EJ at Dads Dollars and Debts]

When I changed it to simple reduction for home office it goes to $0. Net deductions already greater than net income....so I am going to stick with that.

No interest in getting audited, particularly since this year I also have casualty deductions to consider from the Wild Fire I lost my home too....

[jfoxcpacfp]

Rarely recommend the simplified method for attendings and your calculation could very well be correct on a $1.2M home. There is no reason for you to pass up a deduction you are entitled to. Any amount of HO deduction that is disallowed for this year will carry forward to future years. The Simplified Method, once elected, cannot be changed.

The one caveat that I would give is to not self-prepare your return this year (or any year you have a small business) as that will raise the audit risk, given the specifics of your situation.

[ENT Doc]

You can still change it year to year, right? I thought any given year's election, once made, is irrevocable. I would definitely use the method that allowed for the most disallowed losses to be carried forward (regular). The 8829 will hash this out.

[jfoxcpacfp]

ENT Doc wrote:

You can still change it year to year, right? I thought any given year’s election, once made, is irrevocable.

Click to expand...

That is correct. Some elections are revocable, some aren’t and this one falls in the latter camp. Reason being, the deduction does not allow for depreciation and that is permanent. And that’s one reason home office deductions for physicians are typically much higher using the “actual expense” method.

[EJ at Dads Dollars and Debts]

Thanks for the info! Ah the advice of doing taxes on my own or not...this is a tough one. I did them on my own for a long time, then used an accountant for 2 years, then started doing it on my own...

This year is quite complicated - small business with minor income, casualty loss with the fire, big charitable donations, superfund 529s...gotta figure out what to do. Are you offering or are you already booked out? If so message me rates as I am curious.

Thanks!