Home Office Deduction - Which Option Gives Better Tax Write-Off for Partners?

The best approach depends on a few factors, particularly your personal tax situation compared to the partnership's. If you purchase items personally (Option A), you'd claim them as unreimbursed partnership expenses on Schedule E, which are subject to the 2% AGI limitation on miscellaneous itemized deductions. This means you can only deduct expenses that exceed 2% of your adjusted gross income, and you must itemize rather than take the standard deduction. The Tax Cuts and Jobs Act suspended these deductions through 2025, so this route isn't currently available. If the partnership purchases the items (Option B), the business gets the full deduction, and you benefit based on your ownership percentage. This is generally more advantageous in most cases because the business can deduct 100% of the expense, depreciate the assets, or potentially use Section 179 to expense them immediately. One alternative is to have the partnership reimburse you through an accountable plan. You purchase the items, submit documentation to the partnership, and get reimbursed. The partnership gets the deduction, and the reimbursement isn't taxable income to you.

After struggling with this exact issue last year, I found a great tool that saved me tons of headache called taxr.ai (https://taxr.ai). I'm also a partner in a multi-member LLC, and was confused about equipment purchases. I uploaded my partnership agreement and some receipts, and the tool outlined exactly how both options would work in my specific situation. It showed me that having my business reimburse me through an accountable plan (as mentioned above) was actually the best option in my case. The analysis included calculations showing how much I'd save with each approach, which made the decision easy. It also helped me understand some special circumstances where purchasing personally might make sense, like if you're using the equipment for both business and personal use.

I was skeptical about taxr.ai but decided to give it a try with my complicated partnership arrangement. Really surprised by how well it worked! It actually picked up on the special profit-sharing formula in our agreement and showed how that affected equipment purchases compared to regular partnerships. For our situation, it recommended a completely different approach than what I was originally planning. Ended up saving about $3,200 in taxes by having the business purchase the equipment directly rather than doing reimbursements. It even outlined how to properly document everything for potential audit protection. Best part was getting clear guidance specific to our industry instead of general advice that doesn't apply well to our situation. Definitely worth checking out if you're dealing with partnership equipment purchases.

If you're trying to reach the IRS to verify the correct approach for your specific situation, good luck! I spent 3 weeks trying to get through to someone who could actually answer my partnership expense questions. After getting disconnected 5 times and waiting on hold for hours, I found Claimyr (https://claimyr.com) and watched their demo (https://youtu.be/_kiP6q8DX5c). They got me connected to an actual IRS agent in about 20 minutes who confirmed that for partners, especially with the current tax laws, having the partnership purchase equipment directly or using an accountable plan for reimbursement is the way to go. The agent walked me through exactly how to document everything properly. Saved me from making a costly mistake on my taxes and hours of frustration trying to reach someone at the IRS.

I need to eat my words about Claimyr. After posting that skeptical comment, I was still struggling to get through to the IRS about a similar partnership question. Decided to try it as a last resort and yeah, it actually works. Got connected to an IRS agent in about 35 minutes (they estimated 30, so pretty close). The agent confirmed that with the current tax law suspension of unreimbursed partnership expenses, having my business purchase home office equipment directly is definitely the way to go. She explained exactly how to document everything and what forms to use. Saved me from making an expensive mistake on my taxes. Still kind of amazed it worked after spending weeks trying to get through on my own. Worth every penny just for the peace of mind knowing I'm handling it correctly.

Another option worth considering is leasing the equipment through the partnership instead of purchasing it outright. We structured it this way in our 3-partner firm and found some advantages: 1. The partnership can deduct the lease payments as a business expense 2. It keeps the assets off the partnership's balance sheet 3. At the end of the lease, we had the option to purchase the equipment at a reduced price 4. Made it cleaner for accounting purposes You'll want to make sure the lease terms make financial sense compared to purchasing, but it solved some of the exact issues you're describing for us.

Has anyone considered the home office deduction angle? If you're taking a home office deduction already, wouldn't adding office equipment to your home potentially increase that deduction? I'm specifically wondering about the actual sq footage calculations and if new furniture impacts that at all.

Based on my experience as a tax professional, I'd strongly recommend Option B (having the partnership purchase the equipment) in the current tax environment. Here's why: The key issue is that unreimbursed partnership expenses are currently suspended through 2025 under the Tax Cuts and Jobs Act. This means if you buy equipment personally for partnership use, you can't deduct it on your personal return until 2026 at the earliest. When the partnership buys the equipment: - The business gets the full deduction immediately - You can potentially use Section 179 to expense up to $1,080,000 in equipment purchases - You benefit through your ownership percentage without the 2% AGI limitation - The documentation is cleaner for audit purposes The partnership's profitability does matter somewhat - if the business is breaking even, the deduction might not provide immediate tax benefits. However, any unused deductions can typically carry forward, whereas personal purchases give you no current benefit at all. One important consideration: make sure the equipment is used exclusively for business purposes. If there's any personal use, you'll need to pro-rate the deduction accordingly. I'd also suggest documenting the business necessity of each purchase and keeping detailed records of how the equipment is used for partnership activities.