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Home office question.

I'm trying to figure out the Home Office deduction, in relation to my home owners insurance, property taxes, and home loan interest. How do I account for each of those in my transactions if they are all impounded with my home loan? By standard I know that when I file my taxes the information for my property taxes as well as interest paid will be listed but not the homeowners insurance. Also how do I relate that to my quarterly taxes to show the proper information for that. Do I need to go into my home loan account and pull the amounts as they break down on a monthly basis and list that as the business portion of my expense? Also is it the full amount of these monthly numbers or just the percentage of my home, I.E. 16% of my home is used as an office. 

8 Comments
QuickBooks Team

Re: Home office question.

Thanks for providing detailed information about your concern, @smarion75.


You can account all home office related transactions under Schedule C: Home Office. Splitting it to different categories isn’t necessary since QuickBooks automatically calculates the taxes.


See the article How we handle the home office deduction for more details.


Make sure to select the right size of the office on the Annual Taxes page to ensure the accuracy of the deduction. 

  • 100 sq ft, or about the size of a small bedroom
  • 200 sq ft, or about the size of a large bedroom
  • 300 sq ft or more, or about the size of an average living room

 

Here’s how to add it in QBSE:

  1. Go to the Taxes from the left menu and select Annual taxes.
  2. Scroll down and look for the Home office deduction section and select your Home Office Size.

 

Utilize the Simplified or Actual expenses methods to calculate this. Both options are based on square footage.


The system uses the first one to calculate quarterly estimated tax payments, but we do provide special home office categories to help keep track costs if you prefer Actual expenses method.


For more information, refer to this article: Square footage: Why it matters for your home office.


Since Home Office expenses is an annual type of deduction, you have to itemize all its related transactions during the filling of your annual forms. I recommend consulting a tax pro for advice on which method is best for your situation.

 

Check out this link to know more about this type of deduction: Schedule C: Home office expense.


Please let me know in the comment section below if you need further assistance. I'm more than happy to help.

Not applicable

Re: Home office question.

Yes I do understand that, what am trying to figure out though is how how I enter that information and what amounts I enter. Those numbers are impounded into my home loan payment. So as a "transaction" it is one single entry. I have that entry right now allocating 16% of my house payment as the business portion of the amount. As I look at things I don't think that is correct. So do I have to split that up into separate transactions. One for the Insurance, one for taxes, one for interest, and one for the payment itself? and if so do I put the full amounts to the business expenses and quickbooks pulls the 16% from there? Or do I enter the numbers at 16% and quickbooks uses the full number? I'm probably over thinking it but I want to make sure I get it correct.

Not applicable

Re: Home office question.

I understand all of this, but what I'm trying to figure out is how quickbooks pulls the numbers from my transactions. Right now I have it set up to pull 16% of my house payment as a business expense, but I don't think this is correct as that includes a portion that is my principle. How do I set it up so the system knows what amount is my taxes, my insurance, interest, or principle? Do I need to separate the transaction into seperate transactions manually? And if I do do I put the full monthly amount for each of those numbers as a business expense and it knows to only allocate 16% of them toward my deductions? Or do I only enter 16% of the amount as it uses the full number? I know I'm probably over thinking this but I want to make sure this is correct as I know they look at it particularly.

Anonymous
Not applicable

Re: Home office question.

Welcome back, @smarion75,

 

I can provide additional insights about the home office deduction for QuickBooks Self-Employed.

 

The data is based on how you enter your transactions in QuickBooks Self-Employed and what categories you selected for them. If the amount you're recording is the lump sum of the principal, interest and other fees, then yes, need to split it. This is because, only the interest expense is included during the calculation of the taxes, not the principal.


If you're unsure how much interest rates you need to enter, you can confirm it with your financial institution. However, if you opt to enter the full amount, you can categorize this as a business expense. Say for example, you have a $100 down payment for the interest, you'll need to categorize the full $100 amount as interest expense. Make sure you select the size of your home office under Taxes > Annual Taxes.


During annual tax time, Turbotax calculates the tax portion for the total business expenses incurred. Since taxes are automatically calculated, you must make sure all transactions are accounted for in QuickBooks Self-Employed.

 

Please let me know if you have additional questions about this topic. I'll be right here to help whenever you needed one. Have a nice day!

Not applicable

Re: Home office question.

ok so what this says to me is that I will need to manually enter 3 transactions, based on my monthly house payment. One for interest paid that month, one for taxes paid that month, and one for home insurance paid that month. I enter the full amounts under a business expense. I have my home office setting at 16% so the program will extract what it needs accordingly. The actual bank transaction, paid through my bank account associated, is classified as personal. 

Moderator

Re: Home office question.

Thanks for getting back to us,

 

I read your whole conversation with my colleagues, and yes, that's right. You need to create transactions for the interest, taxes, and home insurance paid manually using all the information you've mentioned.

 

This can be done by selecting the Transactions menu at the left pane, then clicking the Add transaction (green) button. 371.PNG

 

Just in case, consider checking out these articles for future reference:

 

 

Please know that I'm only a few clicks away if you have any other issues or concerns. I'll be more than happy to help. Have a great day!

Not applicable

Re: Home office question.

OK only one last question. when I create these transactions do I enter the full amounts of the item or only the percentage of that amount that would be the portion of my house used as a home office. I.E. 16% of my house is my home office and my monthly interest is $500.00. do I enter $500.00 as my amount for the business transaction, or do I enter $80.00 as 16% of the full $500.00 transaction?

Moderator

Re: Home office question.

Thanks for coming back to the Community, smarion75.

 

When it comes to recording the amounts for your home office transaction, we leave it open so you can determine the most advantageous deduction each year for your annual taxes.

 

If you want to charge the whole monthly interest to the business, then enter $500. However, if you opt to record just the portion of your house that is used for the business, then you’ll need to enter the 16% which is $80.

 

Please keep in mind that the deduction is based on square footage, and it's the easiest way to calculate this deduction.

 

You can also ask guidance from a tax expert to help you decide which amount to enter. They’ll be able to assist you in choosing the biggest and accurate deduction.

 

To give you a better view of the office deduction, check out these articles:

It's my priority to help, so please let me know if there's anything you need. I'm always here to assist.

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