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Hi and welcome to Just Answer!If the condominium is used 100% for business purposes by S-corporation - expenses should be deducted on the corporate tax return - 1120S.If there are several S-corporation - the cost must be prorated between them and deducted on separate tax returns.You will depreciate a property and deduct utilities and other related expenses.You may not deduct such expenses on schedule E.
Another option would be to deduct such expenses as employee business expenses - assuming you are an employee of the S-corporation. However - such deduction is limited by your income as an employee - thus if you are not receiving any wages - you may not actually deduct any business related expenses.In additional - employee business expenses are subject of 2% floor limit and you should itemize to claim such deduction.So - claiming deductions on corporate tax return would be better option.
The condominium is in my name , not in the corp name , it is not rented but it is like an apartment not like an office, its actually a 3 bedroom, as for 100 percent of the time , i go there in the eve evenings to watch TV and stuff, and there also is a planted terrace that i take care of, but i do use it almost all day as my office
Did i have to pay the expenses with my corp, if i want to deduct expenses, i paid it personal checks
If you own S-corporation and you own the condominium - and that condominium is used 100% for business by the S-corporation - it is OK to deduct expenses related to that condominium as business related. If business activities are run via S-corporation - these expenses should be deducted on corporate tax returns.Expenses may be paid directly by S-corporation or may be paid by you personally and then reimbursed by S-corporation - so they would be constructively paid by S-corporation.
so what if the condominium is not used 100 percent of the time for business, and what do i do if the corp was not reimbursed
If the condominium is not used 100% for business - your only option - to deduct some expenses as employee business expenses using form 2106 and schedule A.
Or S-corporation may reimburse such expenses via accountable reimbursement plan.
if the corp did not reimburse? if it is used 100 percent than what about it being residential property with 3 bedrooms, is the IRS they going to accept that it is an office?
Well - there are certain requirements to deduct business use of you home (or second home as in your situation)
To deduct expenses for business use of the home, part of your home must be used as one of the following:
Exclusively and regularly as your principal place of business for your trade or businessExclusively and regularly as a place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business; It is possible that the IRS audit you and will verify how the property is used. For instance if you claim 100% business use - but the auditor finds beds in your property - means it is used for personal purposes - the risk is that deduction could be disallowed. However - if it would be clear used for business purposes as office, storage, etc - there should not be any issues.You do not need to provide any additional documents with your tax return unless specifically asked or audited.
ok i dont get it , you say that it clearly has to be used as my principal office ,if it is a second home,it is, but also used 100 percent of the time?
ok i dont get it , you say that it clearly has to be used as my principal office ,if it is a second home,it is, but also used 100 percent of the time?If the property is NOT used 100% for business purposes - you may ONLY deduct expenses related to the part of your home which is used exclusively and regularly as your principal place of business for your trade or business. The fact of having bedrooms is not relevant - but HOW these bedrooms are used is important.For instance - you claim that the condominium is used for business purposes 100% - and assuming you got audited - and the auditor wants to verify that claim. The auditor will look into your condominium and will verify if there is any evidences of personal use. If there is NO personal use - I do not see any issues with claiming deductions.
what if it is used both personally and for business ?
what if it is used both personally and for business ?If the property is NOT used 100% for business purposes - you may ONLY deduct expenses related to the part of your home which is used exclusively and regularly as your principal place of business for your trade or business. For instance - you are using one bedroom as your home-office - and that is 20% of your total area - therefore you will deduct 20% of indirect expenses related to your property.
ok , so i deduct that on my corp return? or personal,
ok , so i deduct that on my corp return? or personal,If that is your property AND the property is used partially for business and partially for personal purposes - you only deduct expenses related to the part of the property which is used exclusively and regularly for business.Because you are using the property as an employee of S-corporation - there are two options. The S-corporation reimburse you such expenses via accountable reimbursement plan - and will deduct on corporate tax return, OR you deduct such expenses on your personal tax return. Generally, in this case - you must use Form 2106 to figure your deduction for employee business expenses and attach it to your Form 1040 Your deductible expenses are then taken on Form 1040, Schedule A, as a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor.
ok so i will deduct it on my corp return and the corp will give that money to me, does that mean i have income from my corp, and if it does, then i have more personal income , and therefore more tax
ok so i will deduct it on my corp return and the corp will give that money to me, does that mean i have income from my corp, and if it does, then i have more personal income , and therefore more tax.Reimbursements to an employee made under an accountable reimbursement plan are not included into taxable income of such employee because these are reimbursements for business related expenses - not compensation for services. Such reimbursements are NOT reported on W2 and not classified as taxable income of employees.
got , so you ow whats going on , can you tell me exactly how you would do this situation if it were for tax purposes?
if it were you
got , so you ow whats going on , can you tell me exactly how you would do this situation if it were for tax purposes?Assuming S-corporation generate income - I would set an accountable reimbursement plan for business related expenses and S-corporation would pay you - for instance monthly. You will provide itemized report of your expenses and supporting documents - S-corporation will keep these documents with other business related documentation - and will deduct such reimbursements on its tax return.
ok great , what about depreciation on the property does that fit in anywhere?
Yes - depreciation is type of allowable expenses.
Publication 587 has detailed information on rules for the business use of your home, including how to determine if your home office qualifies as your principal place of business.
i had the property for more than 10 years, i haven't depreciated it yet ,so can i start now, on what form do i depreciate ?
i had the property for more than 10 years, i haven't depreciated it yet ,so can i start now, on what form do i depreciate ?You need to convert the property from personal to business use. The basis for depreciation is the lesser of your basis and the fair market value at the time of conversion. Specifically for calculating depreciation see IRS publication 587 page 10 - http://www.irs.gov/pub/irs-pdf/p587.pdfIf 2012 was the first year you used your home for business - there is a different method for calculations.Generally - depreciation is calculated on form 4562.
Please be aware of recent changes - the IRS allows an optional safe harbor method that individual taxpayers may use to determine the amount of deductible expenses attributable to certain business use of a residence during the taxable year.See here - http://www.irs.gov/pub/irs-drop/rp-13-13.pdf
4562 on personal or corp , you say convert , how do i do that?
If you are using not more than 300 square feet for a qualified business use of the home
- you are allowed to deduct $5 per square foot without providing details for expenses.
4562 on personal or corp , you say convert , how do i do that?The same form is used for both purposes.Convert - means start using for business purposes. How to convert? Start using the property for business purposes.
so i can use the 4562 depreciation on my chapter s return and allocate it to the percentage of the condominium , so if is 1/3 then i can depreciate it 1/3 , of the total depreciation for that year on my corp return that doesn't make sense, it has to be on my personal its in my personal name?
That is correct. If the property is used by S-corporation - deduction will be claimed on S-corporation tax return - if S-corporation reimburses you as an employee. If S-corporation doesn't reimburse you - you will be able to claim such deduction on your personal tax return.
so im going to claim it on the personal 4562 without any rental income?
so im going to claim it on the personal 4562 without any rental income?You will use form 4562 to calculate depreciation. Then - the depreciation and other related expenses are reported on form 8829 - Expenses for Business Use of Your Home.Then the deductible amount will be transferred to form 2106 Employee Business Expenses and will be combined with other deductible expenses. And finally will be transferred to schedule A.Employee business expenses are not related to any rental activity - so having rental income is irrelevant. But you should have income from S-corporation as an employee - wages reported on W2.
, i dont, the company hasn't made enough to pay
Then - if there is no income from that activity - you would not able to deduct your home-office expenses. Such deduction will be carried forward to following years.
so im going to deduct the office expense percentage wise on my chapter s, then depreciate it on my personal 4562 and transfer that number to te other form you mention ,
im getting confused again, the chapter s had the office deductions and after that if there is no income then i cant deduct it,
don't i pay myself after the expenses? if there is any left?
im getting confused again, the chapter s had the office deductions and after that if there is no income then i cant deduct it,If the corporation has allowable business expenses - it may deduct such expenses - that is not an issue.You personally may not deduct if you have no income - that is correct.
so ill deduct on the chapter s but on the personal it would not be allowed, ok i think i got it, thanks were done for now ill rate you well goodbye
You are welcome.
I need help again on understanding the topic of depreciation and where it gets filed, on the s corp. return or the personal, The corp. is reimbursing me for the use of my home which is in my name , that I got ,with the percentage and all, but where am I going to claim depreciation of the home, if I’m not claiming deduction for the home office on my personal return then I cant claim it on the personal, I have to claim the deprecation on the s return, the condominium belongs to me how ,can the s corp.claim depreciation on something it doesn’t own
on form 2106 What is my my gross income from business, is it the reimbursement amount for my expenses from the corp, is it the k1 income of the corp or my salary?
I cannot get a deduction on my expenses for my home office if the s corp is giving me the money that i am spending!!!