Home Office Deduction For S Corp

If you work from your home as a business owner you may be able to qualify to get a tax deduction for your home office expenses. Ok but not elegant. Yes there is a way to claim a home office deduction with an s corp.

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The third option being reimbursed under an accountable plan provides the greatest tax.

Home office deduction for s corp. Irc section 280a c 6 disallows tax deductions for the home office on rentals by employees to their employers. Here are the steps you need to take to deduct your home office as an s corp. Why home office deductions can be a problem for s corporations self employed individuals whose businesses are set up as sole proprietorships or business entities treated as partnerships for tax. Establish an accountable plan as an employee the s corporation may elect to reimburse you for allowable business related expenses including a home office that it requires you to maintain as a condition of employment.

Normally you can t cleanly take a home office deduction on an s corporation tax return. Many taxpayers have trouble with this area and they fear that such deductions could trigger an irs audit. The s corporation can pay you rent for the home office. Whether you operate as an s corporation or a c corporation you get minor zero or negative benefit when you rent an office in the home to your corporation.

In other words unlike the situation with a sole proprietorship and that 8829 form mentioned a moment ago no tax form exists for throwing a home office deduction onto an s corporation tax return. The s corporation s deduction of the home office expenses was disallowed because the s corporation had reported net losses for the years under review. You must complete an accountable plan. 1 thus owner employees do not achieve home office deductions on the rental.

The s corporation can pay you for the costs of a home office under an accountable plan for employee business expense reimbursement. For business owners who restructured their businesses as an s corp a home office deduction can get complicated and many avoid doing so entirely. Prior to the irs making a recommendation to use the accountable plan and subsequent reimbursements to the employee or shareholders taxpayers would charge their corporation rent and declare the rent as income on schedule e. Accountable plan for s corporation deductions and reimbursements.

But all was not lost because expenses disallowed due to the income limitation would carry over to subsequent years and could be deducted to the extent of s corporation net income in those years. S corp home office deductions can be accomplished on your own. An s corporation may be able to claim the entire amount of allowable home office deductions using an expense reimbursement plan. How you report the expenses and the types of expenses you can claim for your home office depend in part on the legal type of your business.

If you have a home office and recently transitioned your business to an s corp you ll want to understand the steps you need to take in order to continue to take the home office deduction available to you.