Home Office Use

What is the name of your state? IL

An S-corp has two equal shareholders that are husband and wife. They operate the business office from their home. Are the proportionate household expenses deducted as an expense on the 1120S or on their personal?What is the name of your state?

This is not that easy a question for me as I haven't thought of it before. Someone who has gone throught the issue may have an easy answer, but I don't. I can't spend the time researching, so take the options for gut fee

If you rent out part of the house to the corp, you would have to report the income and then deduct expenses. Your city may not agree with this without a license. (Even operating an S-corp may have business license issues.) This seems the safest way, but you are converting part of your house to a business use and would have capital gain issues when you eventually sell.

If you take the deduction as an employee doing things for the convience of the employer, you take it on your 2106 which flows through to your Sch A. You would be limited by both your corp income and by your salary from the corp. This seems, especially for a starting corp, as something which will reduce your deduction.

If you just have the corp reimburse you for the proportional share, you are bringing things into too much of a muddle and could lose the protection of the corp by having it be an alter ego of you.

What your numbers look like would help determine the risks/rewards and guide choices. Things seem like they could get a little too flexible to make a decision based on the small amount of facts provided.

Personally, I discourage clients from taking home office deductions. It muddies the waters when it comes to home sales, and generally doesn't produce a huge benefit on the return. I encourage clients to stick to expenses directly related to the business.