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SE Home Office Deduction Way Lower in 2022 than in 2021

Forum|Forum|2 years ago
January 24, 2024
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Any ideas as to why my SE Home Office deduction would be almost half as much in 2022 (about $9k) as compared to 2021 (about $16k), with nearly the same values entered?

The only difference is that I have about 30% more SE income in 2022, but the same office size and nearly identical Home Office expenses.

I'm pulling my hair out on this one. Thanks!

Best answer by AnnetteB6

Thanks @AnnetteB6 - Just FYI, there's no such "Online" button or link at the top of the desktop app (Mac version) or in the menu bar. I did find the "Send Tax File to TurboTax Agent" menu option in the "Help" menu, so I Was able to export the diagnostics files.

2021 Token = 1166962 – Mac Download Home Business Application Version: 2021.r58.132

2022 Token = 1166963 – Mac Download Home Business Application Version: 2022.r58.087

Thanks a bunch for taking a look. Note that the business in question is listed as "Mail Order Business."

Cheers!

Thank you for providing your token numbers (and the instructions for how to send the tax file to an agent using a Mac).

I was able to take a look at both returns and compare Form 8829 for 2021 and 2022 to find the reason they are not more in line with one another. Looking at your 2021 Form 8829, there is a carryover amount from your 2020 tax return that increases the 2021 home office expense by about $7000. Look at your Form 2021 Form 8829 line 25 to see that amount. This carryover inflated your 2021 home office expense and therefore made your 2022 home office expense look too low.

Taking the carryover amount out of the equation, 2021 and 2022 home office expense only differed by about $600.

@PrimaryMark

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AnnetteB6

As you are entering home office expenses, you will be asked some questions that do affect the expenses that are allowed to be claimed. Pay close attention to the question asking about the percentage of time spent conducting business in the home office. This question will place a limitation on the home office expenses based on the percentage that is entered and the self-employment income attributed to the office.

Also, if you happen to be claiming two home offices due to a move during the year, the allocating of expenses between the two offices can also affect the total expenses that can be claimed.

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PrimaryMarkAuthor

Thanks. As I mentioned in my OP, the only difference between the 2 years is the income. The time spent and square footage split between my 2 businesses is the same, so I'm baffled.

VolvoGirl

Yes I got that. You had more income in 2022. For 2023 do you have enough Net Profit after expenses to use the whole amount? Oh now you say for 2 businesses? That complicates it.

VolvoGirl

Do you have enough Net Profit to deduct it all? Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year. And you have to answer yes to both questions about exclusive and regular use, not just one. The area of your home office must be used regularly and exclusively for business to deduct it.

Or you checked the box on 32b saying Some Investment is Not at Risk.

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PrimaryMarkAuthor

Thanks. Yes, 1 business shows a slight loss both years, where the other shows over $100k, so with all other values the same, I can't figure out why there's such a big difference.

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RobertB4444

Please clarify - what percentage of time do you have between the two businesses? Any percentage of time for the home office on the business that shows a loss would make the home office non-deductible for that business. Is it possible that you changed the percentage of time between the business from last year?

@PrimaryMark

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