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First Year of Business - Questions about Schedule C (Form 1040)

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January 15, 2024
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I started a private practice in 2023 in which I am the only employee. I am seeking some advice as I compile information for Schedule C (i.e. Form 1040) for my 2023 federal tax return. Any and all assistance is greatly appreciated!

1. Schedule C, Part II, Line 30 indicates home business expenses can calculated using a simplified method or detailed using Form 8829. Given this is my first year of business, do I have to use a specific method for expenses? Also, must I choose the same expense method in future years or can the method vary year-to-year? Finally, does claiming the standard deduction on my personal taxes impact which home business expense method I must use?

2. Can I deduct TurboTax fees from Schedule C?

3. Can I deduct my LLC formation fees and state license fees (incurred December 2022) and my LLC renewal fees and state license fees (incurred December 2023) from Schedule C?

4. Can I deduct contributions I made throughout the year to my state's Family and Medical Leave program from Schedule C?

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Best answer by JohnB5677

You have several questions to address.

The simplified method or detailed using Form 8829 are specifically for the home office.

The simplified method allows a standard deduction of $5 per square foot of home used for business, with a maximum of 300 square feet.
On form 8829 you will calculate the use of your home with a percentage of rent, mortgage, utilities and perhaps other home expenses.

Given this is my first year of business, do I have to use a specific method for expenses?

No, you may elect either

Must I choose the same expense method in future years or can the method vary year-to-year?

No, You may elect to use either the simplified method or the standard method for any taxable year. However, once you have elected a method for a taxable year, you cannot later change to the other method for that same year.

Does claiming the standard deduction on my personal taxes impact which home business expense method I must use?

No, The Schedule C election of either method is separate from Your personal tax return.

Can I deduct TurboTax fees from Schedule C?

Yes, but you will have to split the cost between the Schedule C and Your personal return. This can be a 50/50 split

Can I deduct my LLC formation fees and state license fees (incurred December 2022) and my LLC renewal fees and state license fees (incurred December 2023) from Schedule C?

Yes, This and other setup fees are deductible to the business.

Can I deduct contributions I made throughout the year to my state's Family and Medical Leave program from Schedule C?

"Internal Revenue Code Section 45S provides a tax credit for employers who provide paid family and medical leave to their employees. Eligible employers may claim the credit, which is equal to a percentage of wages they pay to qualifying employees while they're on family and medical leave. The credit is effective for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2026. For more information." Please see: Section 45S Employer Credit for Paid Family and Medical Leave

JohnB5677Answer

You have several questions to address.

The simplified method or detailed using Form 8829 are specifically for the home office.

The simplified method allows a standard deduction of $5 per square foot of home used for business, with a maximum of 300 square feet.
On form 8829 you will calculate the use of your home with a percentage of rent, mortgage, utilities and perhaps other home expenses.

Given this is my first year of business, do I have to use a specific method for expenses?

No, you may elect either

Must I choose the same expense method in future years or can the method vary year-to-year?

No, You may elect to use either the simplified method or the standard method for any taxable year. However, once you have elected a method for a taxable year, you cannot later change to the other method for that same year.

Does claiming the standard deduction on my personal taxes impact which home business expense method I must use?

No, The Schedule C election of either method is separate from Your personal tax return.

Can I deduct TurboTax fees from Schedule C?

Yes, but you will have to split the cost between the Schedule C and Your personal return. This can be a 50/50 split

Can I deduct my LLC formation fees and state license fees (incurred December 2022) and my LLC renewal fees and state license fees (incurred December 2023) from Schedule C?

Yes, This and other setup fees are deductible to the business.

Can I deduct contributions I made throughout the year to my state's Family and Medical Leave program from Schedule C?

"Internal Revenue Code Section 45S provides a tax credit for employers who provide paid family and medical leave to their employees. Eligible employers may claim the credit, which is equal to a percentage of wages they pay to qualifying employees while they're on family and medical leave. The credit is effective for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2026. For more information." Please see: Section 45S Employer Credit for Paid Family and Medical Leave

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C

CS2023Author

The instructions for Form 8829 (business use of home expenses) state that taxpayers claiming the standard deduction should not fill out Lines 9-11 (Casualty Loss, Mortgage Interest, Real Estate Taxes). Because I claim the standard deduction on my personal tax return, this seems to apply to me. Can you please confirm? When no expenses are entered in Lines 9-11, Line 27 (allowable operating expenses) results in a $0 calculation.

AmyC

Employee

Pub 587 states:

Taxpayers claiming the standard deduction. If you claim the standard deduction, you will not include any mortgage interest, or real estate taxes on lines 6 and 7; instead, you will claim the entire business use of the home portion of those expenses using lines 14 and 15.

Go back and make entries for lines 14 and 15 to get line 27 to calculate a deduction for you. You can also use the simplified method instead which gives you $5 per square foot of office space up to 300 sq ft.

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