Std Deduction Sch A – Office In Home R.E Taxes and Mortgage Interest F8829 - Spidell

Std Deduction Sch A – Office In Home R.E Taxes and Mortgage Interest F8829

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Message Board Std Deduction Sch A – Office In Home R.E Taxes and Mortgage Interest F8829

This topic contains 2 replies, has 3 voices, and was last updated by Mike Giangrande 1 week, 2 days ago.

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  • #176336
    Herbert Mosberg
    Participant

    I am using Office In Home expenses against Sch C. F8829 instructions require that any r.e. taxes and home mortgage interest be reclassified as “excess” since I am also taking the standard deduction on Sch A. I have prorated the taxes and interest between use in rentals and Sch C. My question is: As long as my business income exceeds the office in home expenses, are the excess portion of taxes and interest still deductible on F8829/Sch C?

  • #176426
    Alan Cherry
    Participant

    >>are the excess portion of taxes and interest still deductible on F8829/Sch C?<<

    Potentially yes, but the math is confusing.  The idea is that qualified mortgage interest and taxes are deductible anyway, even if they exceed business income (Form 8829, lines 8-15).  Other mortgage (for example, exceeding the old one million limit) has always been treated the same as insurance and utilities, not deductible beyond the income amount (lines 16-26).

    So if you don’t itemize, the business percentage is still deductible, but only up to net income.  Unallowed expenses carry over to next year.  This rule and the math did not change with TCJA, except now there is a Schedule A limit on taxes as well as mortgages.  Form 8829 is basically the same, with the addition of one new line for excess taxes.

  • #176467
    Mike Giangrande
    Participant

    The IRS’s Office of Chief Counsel issued a Technical Advice Memorandum (TAM) on this topic earlier this year and we have covered it in our seminars.

    The TAM is only about five pages long and should answer your question, with examples.

    https://www.irs.gov/pub/lanoa/pmta-2019-01.pdf