Office in the home for real estate agent

He was always provided an office at the agency. Starting in about 2015 he used it less and less, the national agency finally reduced the size of its office to an open space with computers and hook ups, nothing specifically assigned to him in late 2019 - 2020 he never went into the office except a few times to use specific office equipment. Wife wanted him to office there not at home, but 2020 and the future can he take office in the home.???? Meetings with larger numbers which do not happen often are the main times he would be utilizing agency space.

How does he report his income? Schedule C or W2?

See Sec 280A(c)(1) and the related case law to determine if you can make one of those fit.

Income is reported on a 1099.

Income is reported on a 1099.

If he uses a room in his house for business purposes (the forms and instruction read solely for business purposes), I would fill out the 8829. Some preparers think the in-home office deduction is a red flag, but with Covid and work from home being prevalent last year, I don't blink twice at taking it for my clients. One firm I worked for took it on all clients with a Schedule C (that statement may be controversial). The modest approach is to take the safe-harbor amount of $5 a square foot. How much are we talking?

If he uses a room in his house for business purposes...I would fill out the 8829.

But is that the test though?

If he uses a room in his house for business purposes...I would fill out the 8829.

But is that the test though?

I believe he already established that he's using it for his principal place of business and on a regular basis (working from home)...

Maybe it's just me, but I don't see in this thread where Jon has established that the home office is the principal place of business and is being used on a regular basis. I doubt the question would have been posted if he had.

For all we know the guy used it for 10 hours a month during 2020.

My question when home office arises is if the home office is where they perform exclusively perform administrative and managerial functions. If yes, it by default qualifies as principal place of business. Now, if you have another office with staff and YOU have to be present to manage the staff, then that avenue is not valid.

where they perform exclusively perform administrative and managerial functions.

Isn't that followed by: and there is no other place available to the taxpayer for this?

where they perform exclusively perform administrative and managerial functions.

Isn't that followed by: and there is no other place available to the taxpayer for this?

No. Pub 587 states this, and there is plenty of support for it:

Your home office will qualify as your principal place of
business if you meet the following requirements.

• You use it exclusively and regularly for administrative
or management activities of your trade or business.

• You have no other fixed location where you conduct
substantial administrative or management activities of
your trade or business.

Isn't that what I said, although not in the exact words?
OK I see the difference. Other available does not mean that you use the other space.

Isn't that what I said, although not in the exact words?
OK I see the difference. Other available does not mean that you use the other space.

It also does not mean you cannot have two offices--one home and one commercial. But virtually all admin/managerial functions must be done from the home office, even if the other office is where you generate actual income.

I subscribe to the Bradford Tax Institute and find a lot the information useful. I always look at his sources and form my own opinion but I cannot say I have found anything I would argue against (concerning what they post).

Thanks guys - so some of you believe the 1099 gives you a chance, some believe principle place does, some even think two places can work. I think it is interesting because of how the current market is - if your a realtor on a Schedule C who even wants to go to the agent's office, unless closings are done there.

I remember when Doctors lost having home offices for a variety of reasons.

so some of you believe the 1099 gives you a chance...

After rereading the thread, I'm not sure how you're coming to this conclusion.

The tests are pretty clear under IRC Sec 280A(c)(1). And plenty of case law that provides examples.

I would never think that mere presence of a 1099 gives a taxpayer latitude to claim the OIH deduction.

A 1099 does not necessarily open the door to the home office deduction, just as ManVsTax indicated. You have to look at the facts and circumstances--regardless of what spin a client may try to put on it (telling you what they think you want to hear)--in order to claim it. This thread just presents different avenues for being able to legitimately claim home office.

I think that is what I said!!!!Some think??????

Does your client pay a desk fee? Or is the commissions split with house?

no desk fee

As long as your client is self-employed and uses his a space in his home regularly and exclusively for business purposes such as substantial administrative or management activities (as CornerstoneCPA provided), your client should be eligible for the home office deduction.

To take it one step further. It's not just that they qualify and leave it at that. You would likely want to counsel your client on the documentation of the home office. For example, you may have them take a picture of the space they designate as their home office space to support the exclusive portion of the requirement. In addition, you may have them punch a clock and log their time spent using the space for business to establish the regular portion of the requirement.

As WarnickCPA mentioned earlier, the office use of home deduction once was a red flag for audits. But you win those audits by providing support for the position you're taking on the return. Support would be examples I've mentioned above. These are the steps I take when working with clients on the deduction. I may get laughed at by the client who will likely not worry about the support, but at least it has been explained.