Moved midyear - home office deduction

Forum|Forum|3 years ago
April 12, 2023
1 reply
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So, move in March to a new home. Both new and old home have a home office. What I noted was that as soon as I added the second home office (and allocated per the instructions here - https://ttlc.intuit.com/turbotax-support/en-us/help-article/expense-accounting/allocate-expenses-two-home-offices/L8FenpjT0_US_en_US?uid=lgcobbd1), indicating that the home offices were used 25%/75% respectively, the tax liability increased significantly (by about $3000).

On the old home, there was a significant carryover of prior year operating expenses. Could that be the reason for this huge swing? Mostly wanting to make sure I'm not inadvertently shorting myself a deduction I should be able to take, but can't convince TurboTax to set it up properly. Any help would be greatly appreciated!

TurboTax Home & Biz Windows

RobertB4444

There is no carryover with the home office deduction. That's a use-it-or-lose-it deduction. The only thing I can think is that your home office deduction for the old house was significantly higher than the deduction for the new house. If your actual expenses at the old house were a lot higher than the new one that could be part of the problem. If you are using the simplified method you should note that only one of the offices can use that and if you used it on the 25% office then the second office would have a significantly lower deduction unless the actual expenses are pretty high.

Walk back through the home office section and adjust which house takes the simplified method and make certain that all of your expenses are entered. If you're following those instructions then you're doing it correctly so there is definitely a data entry disconnect here.

@mgarvin

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mgarvinAuthor

Thank you @RobertB4444 for the assistance.

Regarding carryover, I'm confused - I have used TT for years and the carryover of expenses from that business (primarily home office expenses) has come over automatically every year - starting in 2018 it put excess deductions on my Form 8829 (line 43), which of course was taken into 2019 and so on. Am I misunderstanding how that works? Is it that I can carry it over until that home office is no longer in use, as is the case here?

In terms of actual expenses, the new home office occupies a lower % of the home but the expenses this past year for the whole home are much higher (whole lot of repairs).

Lastly, it does not appear that either home is using the simplified method. Changing it on the 8829 for either home increases the tax due significantly.

RobertB4444

No, actual expenses can be carried forward, just not the simplified method. Since you are using actual expenses then you will need to show a disposition of the first home office in order to take all of those carried over expenses before using the second home office. Go through the disposition section and recapture the depreciation and you will be able to use the suspended deductions and can then start using the second home office.

@mgarvin

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