Monday, May 28, 2012

Home office: Partnerships

Please remember that we are answering the following question on this post:

What if I have a partnership, the partnership does not have office space and therefore, I must use space in my home...

The rules for partners to expense the business use of their home is fairly straightforward.

Please note the following issues, there may be limitations on the amount you are able to expense.Also, you should not include the expense amount on form 8829, because this form is to be used for Schedule C filers specifically. If you do not know what this means, you should ask your accountant, and not try to take a deduction for these expenses on your own! 

Also, if you receive Rental payments from the partnership you may not deduct home office expenses, because you would be deemed an employee under the "rental-to-an-employer" rule found in IRC Sec. 280A(c)(6).

Now that we have that out of the way, we can go back to the task at hand. Partners can take a deduction for their home office expenses if the space is used regularly and exclusively for partnership business and at least one of the following three tests is passed:

1. The home office is used as the partner's principal place for conducting business.

2. The home office is used as a place where the partner meets or deals with clients or customers of the partnership in the normal course of business.

3. The home office is a separate structure (such as a converted garage or barn or other stand-alone building) and is used for any purpose in connection with partnership business.

If you have follow-up questions or clarification questions as to specific situations contact your accountant, or send me an email. 

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