Home Office Carryforward

Today TaxMama hears from Erin in Washington State who wants to know. “For the unused home office deduction, can I choose not to claim home office deduction in the years of loss and claim it when I make a profit?”

Dear Erin,

It’s not exactly a choice.

Each year, fill out the Form 8829 with all the details and numbers related to your home office.
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If your Schedule C shows a loss, the software will carry the unused loss forward automatically.
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This is one of the few carryforwards that will reduce your income taxes in the future AND your self-employment taxes, too. So, don’t overlook filling in the Form 8829 just because your business has a loss.

I discovered this little double benefit when filing multiple years of tax returns (7 or 8) for a client who had losses year after year.
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Too many losses, so I went back and removed the Form 8829. Then, oops, in the last year, she had over $50,000 in profits. So I had to re-enter all the office in home info for each year – and it wiped out most of her profit AND the SE tax – and got her out of trouble with IRS. And no, those returns were never audited, even though they were all filed at the same time.

But remember, if you don’t fill in the form, you won’t have the carryforward.

On the other hand, be creative about building your business this year and you won’t have to worry about losses.

And remember, you can find answers to all kinds of questions about home offices, and other tax issues, free. Where? Where else? At TaxMama.com

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