Originally Posted by benj4786
#1;Could someone tell me if I have a choice between taking mortgage interest, real estate taxes, etc on my Schedule A vs taking them for a home office deduction?
#2;The reason I ask is that I have enough on my 8829 to bring my small business income to zero, leaving me with a carryover for next year.
#3;If I take these items off my schedule A and put them on my 8829, my bottom line is actually worse because the home office deduction is limited by my small tentative profit on schedule c. I'm hoping to keep these items on schedule A and only claim direct expenses on 8829.
Thanks for your help!
#1; you need to be careful to separate business expenses from personal expenses. Then separate expenses into two categories:direct expenses that are those used only for the business section of your home. An example would be paint, wallpaper, and carpeting used only in that area;indirect expenses that are those paid for running your home which can be deducted based on the percentage of the home used for business .Typical indirect expenses include rent/mortgage interest, utilities, insurance, and general home repairs.For example, if you have separate business and personal phone linesor if you have set up a separate business line in your home, you can deduct the use of this line for both local and long distance calls I mean for your exclusuie biz purposes. Be sure you do not use this line for personal calls. Remember the "exclusive" provision.
#2;As you can see, even if your home office and the business expenses associated with that office are otherwise deductible, your deductions may be limited, if your gross business income is less than the total amount of your business deductions (You can carry it over to the following year, 2014 in this case, whether or not the business is still conducted from the residence. The carry over is, however, still subject to the limitation that it cannot exceed the income for the year from that business ;a home office cannot create or increase a loss); Your deduction of otherwise nondeductible expenses, such as insurance, utilities and depreciation (with depreciation taken last) is limited to the gross income from the business use of your home minus the sum of the the business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes and casualty and theft losses);The business expenses that relate to the business activity in the home (for example, salaries or supplies), but not to the use of the home itself. For example, assume that you have met the requirements for claiming a home office deduction and you have calculated your home office percentage is 20% and say your gross business income is $10K.then, you need to subtract your deductible mortgage interest percentage for the business, say $1500 ($1500 x 20% = $300). Subtract the business expenses NOT associated with the business use of your home ($4.5k, for such items as advertising, travel, and fees for professional advisers).so $10K - $300 -$4.5K = $5.2K. This is the limit to which you can deduct other business expenses associated with the use of your home.From this limit you can deduct, first, allowable business expenses associated with the use of your home, then allowable depreciation on your home (based on your office deduction percentage).If you cannot deduct all of your expenses and depreciation because of the limit, you may be able to carry over some or all of these expenses to the following year. You need to check with your tax adviser for more details on this carryover allowance.Note that you can always deduct allowable business expenses not associated with the use of your home, and you can always deduct the business percentage of your mortgage interest. But you will be limited in your ability to deduct other home business expenses, based on your income. For example, if you have a net loss, you will not be able to deduct any home business expenses or depreciation in that year (you should save your calculations for your tax adviser or preparer).
#3; A home office cannot create or increase a loss as mentioned above;you can’t deduct non-biz related home expenses reported on Sch A of 1040 on Sch C of 1040;
“I'm hoping to keep these items on schedule A and only claim direct expenses on 8829”======>>Correct; generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as biz expenses. However, you may be able to deduct expenses related to the biz use of part of your home if you meet specific requirements; indirect home expenses are reported on Sch A of 1040 and you can deduct them as long as yu itemize your deductions on your return. UNLESS you itemize your deductions, you can’t deduct them on your return.
NOTE: Certain expenses related to the use of your home may be deducted whether or not you use your home for business. These expenses include mortgage interest, qualified mortgage insurance premiums, real estate taxes, and casualty losses. Where you deduct these expenses depends on how you figure your deduction for business use of the home. You may use actual expenses to figure the deduction. In general, you will deduct the business portion of these expenses on Sch C (Form 1040) as part of your deduction for business use of your home. If you itemize your deductions, you will deduct the personal portion of these expenses on Sch A (Form 1040).