Q. TAX QUESTION: Calculating deductions for home office
This is my first year filing as a business owner, and I thought I would use TurboTax just to keep it as simple as possible this year (can't afford a CPA at the moment, and so far I don't think I have needs complicated enough for it anyway).
TurboTax wants to calculate my home office percentage by taking a ratio from the square footage of my entire house compared to that of my home-office. However, I do not own or rent my entire home. I rent two rooms in a home - one is my bedroom and the other is my home office. Shouldn't the ratio be related to these two rooms, rather than including the entire house, which is occupied and paid for by other people?
Thanks.
Area of Expertise: Accounting and Finance
3 answers | Asked on 03/26/10 by:
Peter Blanchard
Portland, OR, United States
Answers
jesus Johnson
yemen, NC, United States
Hi Peter. I am by no means an expert in finance and taxes. However, when doing your ratio, if you include the entire square footage of the home then the percentage deducted would be much less than that if you only included the two rooms rented.
That said, I would say it is better to error on overpaying than under when dealing with the IRS (include the entire square footage).
This is tricky. I am looking at it this way - I am assuming that all your business mail comes to you through the primary residence/address of the owner and that you have no seperate apartment number identifying you as a seperate resident from the primary owner.
If you have nothing identifying you seperately then include the entire square footage of the house. If you do then of course, only include your residence which is your footagetwo rooms. If you can answer yes to this question then include the whole square footage: If the owner fails to pay the mortgage even though you are paying rent to him - when the house gets foreclosed will you lose your room?
I hope this helps feel free to call this number directly it is specifically for questions concerning home business deductions. (800-829-3676)
Posted on 03/26/10
Peter Blanchard
Portland, OR, United States
Hi Cyrell, thanks for your response.
I do not have a separate address or apartment number, and yes, if the house was foreclosed on I would lose my space. However, it still doesn't make sense to me to use the entire house in my calculation - after all, I'm trying to deduct a portion of my expenses, and my expenses do not pay for the whole house.
I will give that number a call and see what they have to say about it. Thanks!
Posted on 03/27/10
Albert Winters
Crawfordville, FL, United States
Peter,
You might find IRS Tax Tip 2010-53 helpful in resolving your question. http://www.irs.gov/newsroom/article/0,,id=108138,00.html
Posted on 03/31/10
