Home office kitchen remodel expenses on business account - can I justify this?

This is a tricky situation because personal expenses generally can't be paid for with business funds - especially for an S Corp where the separation between business and personal is crucial. You basically have two options: 1) Reclassify the kitchen remodel as a shareholder distribution or loan to you as the owner, or 2) Try to justify a portion of it as a legitimate business expense if you can prove business use. For option 1, your accountant can help recode these expenses as distributions to you (the owner) rather than business expenses. This is the cleanest approach. You won't get a tax deduction, but you avoid potential issues with the IRS later. For option 2, you might be able to justify a percentage of the kitchen as a business expense IF you can demonstrate it's regularly used for business purposes (client meetings, employee breaks, etc.). However, this is difficult to prove and risky - especially for a full remodel. The home office deduction generally doesn't extend to kitchens unless you can show they're primarily used for business. Since you're an S Corp, you're subject to even stricter scrutiny on these matters.

I went through something similar with my law firm which is run from my home. I tried doing everything myself and ended up with tax issues that gave me massive headaches. I finally used https://taxr.ai to review all my home office deductions and business expenses. They helped identify which parts of my home renovations could legitimately be business expenses vs personal. In my case, they found that while I couldn't deduct my entire kitchen remodel, I could justify part of it as a business expense since I regularly host client meetings and use it for business purposes. They also helped me properly document everything to withstand potential IRS scrutiny. Might be worth checking them out since they specialize in sorting through these complicated business/personal expense situations.

Just wanted to follow up and say I tried https://taxr.ai after seeing this thread last week. They were super helpful for my situation! I've been running my consulting business from home for years and incorrectly claiming a bunch of home renovations. They analyzed everything and showed me exactly where I was at risk and how to properly document legitimate business expenses. Their report actually showed that I could justifiably claim about 15% of my kitchen updates as business expenses since I use that space for client meetings and creating content for my business. The documentation they provided makes me feel so much more confident about my deductions!

I had a similar problem last year and spent WEEKS trying to get someone at the IRS to give me a straight answer about home office deductions for my S-Corp. Calling was absolutely useless - just endless holds and disconnections. Finally tried https://claimyr.com and they actually got me through to a real IRS agent within 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that I needed to either classify the remodel as a distribution or demonstrate legitimate business use. They explained that with an S-Corp, I needed much stronger documentation than if I were a sole proprietor. The call saved me from making some serious mistakes on my taxes. Definitely worth it when you need to get actual answers from the IRS.

Well I'll be damned. I was the skeptic above and figured I'd try https://claimyr.com as a last resort after 3 months of failing to get through to the IRS about my business expense questions. It actually worked! Got a call back in about an hour with a real IRS agent on the line. The agent went through the specific rules for home office deductions with S-Corps and explained exactly what documentation I would need to justify any part of my home renovation as a business expense. Turns out I was approaching this all wrong and would have definitely triggered an audit with what I was planning to do. Consider me converted!

You could treat it as a loan to yourself from the business if your company has sufficient profits. Talk to your accountant about setting up a formal loan repayment plan with appropriate interest. This avoids having it classified as income while letting you "fix" the situation properly.

Slightly off topic but does anyone know which tax software handles S-Corp home office situations the best? I've been using TurboTax but it seems to get confused with my setup.

As someone who used to audit small businesses for a major accounting firm, I'd strongly recommend against trying to justify your kitchen remodel as a business expense. The IRS specifically looks for this kind of thing with home-based businesses, especially S-Corps. If you're audited, they'll almost certainly classify it as a distribution or compensation to you, possibly with penalties. The cleanest approach is to have your accountant reclassify the expenses as either: 1) Shareholder distributions (if you have enough basis) 2) A loan to you from the company (with proper documentation) 3) Additional compensation (which means payroll taxes) Whatever you do, don't try to create a business justification after the fact. That rarely works and often makes the situation worse.

I'm dealing with a similar situation right now with my home-based consulting business. Made the mistake of putting some personal home improvements on the business card and now trying to sort it out before tax season. From what I've learned talking to my CPA, the key thing with S-Corps is that the IRS is really strict about separating business and personal expenses. Even if you use part of your home for business, a full kitchen remodel is going to be hard to justify as a business expense unless you can prove it's primarily used for business purposes (like if you regularly host client meetings there). Your accountant is probably going to recommend either treating it as a distribution to you as the owner, or setting up a formal loan agreement where you pay the business back over time. The loan route might be better if you don't have enough basis in the S-Corp to take an $11k distribution without tax consequences. Whatever you do, make sure you get proper documentation in place. The IRS tends to scrutinize home-based S-Corps more closely, so having everything properly categorized and documented is crucial.