If you have gotten used to using the home office deduction, you may be wondering if you can still use it when you have an S corporation. In other words, how can you be sure that the IRS will still let you take advantage of this deduction? Here’s a quick look at some methods that work—and some methods that don’t.
Methods That Don’t Work
Many people assume they can use the home office deduction simply by renting their office to their business. However, you won’t be able to deduct any money using this method. You also can’t use IRS Form 2106 to claim your home office expenses as unreimbursed employee expenses, since you need to itemize deductions in order to benefit.
How Reimbursement Works
One method that does work for claiming the home office deduction is reimbursement. So, how does this method work? You’ll start by submitting your home office expenses as an employee of your S corporation. Then, you’ll be reimbursed for the expenses as business expenses, which are not taxable.
The Requirements for Reimbursement
In order to claim your home office deduction using reimbursement, several things need to be in place. You need to have proof of the expense, proof of exclusive and regular use, proof of business use, and proof that you are using the home office for the convenience of your S corporation. Your home office also needs to be necessary for you to do your work and for the corporation to function properly. In other words, the home office can’t simply be something you’re using for your own convenience.
If you’re looking for help understanding your business’s finances, you can always turn to The Royce CPA Firm for the capable business services you require. From pre-audit preparation assistance to full-service tax preparation, we can help you with all of your business’s accounting needs. Call our Tucson office today at (520) 321-4626 for more information.