Where is the "Gross income limitation" for home office deduction coming from?

Forum|Forum|1 year ago
February 20, 2025
1 reply
0 views

TurboTax is disallowing my home office deduction because, per the "Simplified Method Worksheet", it claims I have a "Gross income limitation" of -3,628. I have no idea where this number is coming from. All other calculations in TurboTax show substantial income after expenses.

Best answer by KeshaH

OK. Here it is:

BTW, I don't think it matters, but I'm using TurboTax Deluxe Mac, not Windows.

Thanks.

Thank you for sharing your token. I've looked over your Form 8829. There is a smart worksheet for line 8 on the form. Line B seems to be stuck. Right now it's showing that none of your gross income on your Schedule C was attributed to your home office. If you update this line to 100% directly on the form, the gross income limitation will update to show your actual income amount.

AnnetteB6

Please take a look at your entries in the Home Office section of your return and verify that you have entered a number on the screen titled Business conducted in home office. It is asking for the percentage of time you spend conducting business in your home office. If this field is left blank, then the program assumes that no business is conducted in the home office and the deduction is disallowed. This number is used to calculate the gross income limitation that is shown as a negative number in your case.

If the number entered on that page is less than 100%, then the calculation could take your profit to a negative number when using the simplified home office calculation. If this happens, then the deduction is disallowed.

Here are the details about how the Simplified Home Office deduction works, and what could be causing the situation in your return.

For any home office deduction (actual expenses or simplified), the home office deduction is not allowed to take a Schedule C bottom line from a positive profit to a loss. Therefore, before the home office deduction is calculated, the tentative profit or loss of the business is considered. If the number is a loss, then no simplified home office deduction is allowed. However, even with a loss, an actual expense home office deduction can be calculated and carried over to the next year. Carryover is only possible when using the actual expenses, not the simplified method.

The profit/loss number that is used to decide whether the home office expense is allowed comes from Schedule C line 7 minus Schedule C line 28. If the result is positive, then that is the first step to get the simplified home office deduction.

However, the Business Conducted in the Home Office comes into play too. If that number is not entered, then it is assumed to be zero. Zero times the income on Schedule C line 7 minus Schedule C line 28 gives a negative number, which means no home office deduction in the current year (carryover if using actual expense method).

If the Business Conducted in the Home Office percentage is any number less than 100%, then the amount on Schedule C line 7 is adjusted by that percentage before the expenses are subtracted. So even with what you expect to be a positive profit situation, the percentage of business conducted in the home office can drop the income to a level where the profit is negative instead of positive. This means that the simplified home office method is not allowed. Again, using the actual expense method can work, but the home office expense is carried over to a future year.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

fssbobAuthor

My Schedule C line 7 minus Schedule C line 28 is heavily positive. In the Home Office dialog, I'm not asked for percentage of time you spend conducting business in your home office. I AM asked "how many months did [my name] use this office at least 15 days of the month", to which I responded all 12 months.

Is the percentage of time you spend conducting business in your home office somewhere else? If so, where?

Thanks.

fssbobAuthor

I just realized--the problem is that Turbo Tax is ignoring my Line 7 on Schedule C--gross income--and treating it as zero. That's why it's showing -3,628, which are my Total expenses (Line 28). So the question is why is it doing this?