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Stephanie B.
Stephanie B., Enrolled Agent
Category: Tax
Satisfied Customers: 556
Experience:  MTax, EA, QuickBooks Proadvisor. Over 15 years accounting and tax experience specializing in individual and small business.
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This question is for a CPA or Tax Attorney. My wife and

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This question is for a CPA or Tax Attorney.

My wife and I own a consulting business out of our home. We have regular clients who patronize our front office. We also use a room in our home as a private office. All total, about 15%.

The business is a Partnership and I have to file a 1065. I'm not sure how to write of the area of the home used for the business portion on form 1065. Do I rent the rooms from myself to my Partnership? That's the only thing that I can figure out on my own, but would like expert opinion regarding.

Stephanie B. :

Thank you for your question.

The business use of your home is an unreimbursed business expense reportable on your Schedule E, page 2. You will complete IRS Form 8829 showing the business use of the home compared to the total square footage of your home. This allows you to deduct a percentage of your mortgage interest, real estate taxes, insurance, utilities, depreciation on your home and etc against your self employed income. This will reduce your income tax liability as well as your SE tax liability without having a self rental issue.

Here are links to the form as well as the instructions.

Please let me know if you need additional clarification.

I look forward to your response.



So I cannot rent the space to my partnership?

Stephanie B. :

You could but that is considered a self rental and will have to watch how it is handled closely. In addition, you will have to pick that up as income on your Schedule E, page 1 as a rental activity and deduct the % of expenses such as mortgage interest, insurance, and all those other expenses you can report on 8829) against that income. If you have to much net profit on this, the IRS may look at it as trying to avoid SE Tax. If you have a net loss from this, you will not be able to deduct that loss unless you have other passive income. This can create a loss trap.


Thank you.

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