office in home simplifed method

[cl54]

Trying to figure out how to limit the simplified method as they were only in business 3 months out of the year anyone had this issue before?

Thank you

[PKCPAMST]

In Rev. Proc. 2013-13, the IRS provides this guidance for a qualified business use of a home for a portion of the taxable year.

Step 1. Add 300 square feet for each month of business use.  (If business use area is less than 300 sq. ft., use that lower area.)

Step 2. Divide the sum from Step 1 by 12.

Step 3. Multiply the quotient from Step 2 by $5.

In Lacerte, go to Screen – Business Use of Home. In the Field, Business use area, enter the figure from Step 2, and in the Field 2=elect to use simplified method, enter 2.

[cl54]

Yes I did that my question or problem is they didn't use the office all year due to covid they only used it 3 months of the year however I don't see anywhere in the system to prorate the months used on the simplified?

[PKCPAMST]

Following  Rev. Proc. 2013-13,

Step 1 - 300 sq. ft. x 3 months = 900.

Step 2 - 900/12=75 sq. ft. You will enter this in the Business use area.

Thus, the deduction will be limited to $375 for 3 months. This equals to one fourth of 300 x 5 =1,500 for 12 months.

[qbteachmt]

Don't prorate the Use. Annualize it.

Example: 300 SF in use; 3 months of use

300 square feet multiplied by three months equal to 900 square feet total used that year. This is then divided by 12 months in the tax year for an average annual use of 75 square feet, and the total annual use of 75 square feet would then be multiplied by the $5 allowance for a $375 deduction.

Double-check your work:

300 sf * $5 per sf = $1500, and they used it .25 of a year = $375

[cl54]

Thank you!