Home Office Deduction For S Corporation Shareholder

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. 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. Twenty five years ago congress enacted a law prohibiting the deduction of expenses related to the rental of a portion of one s home to their employer.

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There are two options.

Home office deduction for s corporation shareholder. 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. How to calculate the deduction for an s corp home. Normally you can t cleanly take a home office deduction on an s corporation tax return. The s corporation can pay you for the costs of a home office under an accountable plan for employee business expense reimbursement.

An s corporation can pay rent to a homeowner including a shareholder in the corporation and deduct it as an expense but. The s corporation can pay you rent for the home office. The third option being reimbursed under an accountable plan provides the greatest tax. For home office expenses shareholders can be reimbursed for an allocated portion of their home maintenance expenses including mortgage interest property tax insurance utilities home internet trash and repairs and maintenance.

The answer is yes. The s corporation gets a deduction and the shareholder gets a tax free reimbursement. Accountable plan for s corporation deductions and reimbursements. Office in the home deduction limitations for s corporation shareholder employees.

Yes there is a way to claim a home office deduction with an s corp. Can you still get a deduction for your home office if you are an s corporation shareholder. Here are the steps you need to take to deduct your home office as an s corp. 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.

When a business owner incorporates as an s corporation the home office deduction is not available to the corporation without some workarounds. Either you rent a portion of your home to the s corporation as office or storage space or the s corporation reimburses you for the home office use under an accountable plan. Technically the owner of a corporation can claim tax deductions for a home office in one of three ways two of which are pitiful and need rejection. You must complete an accountable plan.

Ok but not elegant. Rent office to the corporation. 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.