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Entering business use of home - multiple businesses in one home

SOLVEDby IntuitLacerte Tax81Updated July 19, 2022

This article will show you how to enter the business use of a home where multiple businesses are run in the Individual module of Lacerte.

Follow these steps to enter one home office from which multiple businesses are run:

  1. Go to Screen 29, Business Use of Home (8829).
  2. Click Add in the left navigation panel to set up a separate Business Use of Home screen.
    • In the Home list,  you will have two homes listed.

business-use-of-home-multiple-businesses-one-home-lacerte.png

  1. Select Home 1 from the left navigation panel.
  2. Scroll down to the Business Use of Home section.
  3. Enter the Total area of home (sq. ft.) and the Business use of home (sq. ft).
  4. Scroll down to the Indirect Expenses section and enter any applicable fields.
    • The indirect expenses for the home need to be split between the offices. In order to do so, enter the indirect expenses in full for each of the home offices on each screen.
  5. Scroll down to the Direct Expenses section and enter any applicable fields.
    • For direct expenses, enter only the amount of expenses that are allowable for that specific business, as any direct expense will carry directly to the form and be allowed in full.
    • Mortgage interest and real estate taxes input in the direct expenses section will be allowed in full for the home office and will not be allocated in any way.
  6. Scroll down to the Allocation section.
  7. Enter the Home office name or number entered first on (screen 29), if home used in more than one business as Home 1.
 

When you repeat this step for Home 2, you should still select Home 1 for the Home office name or number entered first on (screen 29), if home used in more than one business field.

  1. To override the automatic calculation, make an entry in the Percentage (.xx) of indirect expenses and business use area to apply to this business, if not 100%.
    • The program will use the Total area of home (sq. ft.) and the Business use of home (sq. ft) inputs (Screen 29, codes 1 and 2) and the Percentage (.xx) of indirect expenses and business use area to apply to this business, if not 100% (Screen 29, code 512) to allocate the indirect expenses between each home office.
  2. Select Home 2 from the left navigation panel.
  3. Repeat steps 4-10 for Home 2.

The program adjusts the amount of indirect mortgage interest and indirect real estate taxes that carries to Schedule A so that only the non-business portion is reported on Schedule A.

This example illustrates the entries required to calculate Office at Home expenses for one home office allocated to multiple businesses.

Scenario

John Smith is a self-employed attorney who uses one 400 square foot room in his 2,000 square foot house as an office.  He files two Schedule C forms, one for his attorney business and one for his secondary tax preparation business.  John estimates that he uses his home office 70% of the time for his attorney business, and 30% of the time for his tax preparation business.  For this situation, the correct entries in the program are as follows:

Home 1

FormSch C
Activity name or numberAttorney
Business use area (sq. ft.)400
Total area of home (sq. ft.)2000
Percentage of indirectexpenses to apply to thisbusiness, if not 100%0.7

Home 2

FormSch C
Activity name or numberTax Preparation
Business use area (sq. ft.)400
Total area of home (sq. ft.)2000
Home office name ornumber entered first onScreen 29, if home usedin more than one businessHome 1
Percentage of indirectexpenses to apply to thisbusiness, if not 100%0.3
  • The business use percentage for Home 1 is computed as follows: 400 * 0.7 = 280....280 / 2000 = 14%.
  • The business percentage for home #2 is computed as follows: 400 * 0.3 = 120 .... 120 / 2000 = 6%.

The business use percentage is applied to all of the indirect expenses. John's total indirect expenses for his home were as follows:

Mortgage Interest$12,000
Real Estate Taxes4,000
Insurance1,000
Repairs1,500
Utilities3,400

In addition, he had miscellaneous home expenses directly related to his attorney business of $2,700 and miscellaneous home expenses directly related to his tax preparation business of $2,000. The correct entries are as follows:

Home 1 (tied to attorney)

Mortgage interest (indirect)$12,000
Real estate taxes (indirect)4,000
Insurance (indirect)1,000
Repairs (indirect)1,500
Utilities (indirect)3,400
Misc. exp. (direct)2,700

Home 2 (tied to tax prep)

Mortgage interest (indirect)$12,000
Real estate taxes (indirect)4,000
Insurance (indirect)1,000
Repairs (indirect)1,500
Utilities (indirect)3,400
Misc. exp (direct)2,000

As seen above, the indirect expenses are entered in full for both Home 1 and Home 2. The square footage and the entry in the Percentage (.xx) of indirect expenses and business use area to apply to this business, if not 100% field are used to calculate the business use percentage, which is then applied to each indirect expense. The program carries the personal, non-business portion of the mortgage interest and real estate taxes to Schedule A. You don't have to enter the business use of home expenses again on Screen 16, Business Income (Sch. C).

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