How to claim simplified home office deduction on Schedule E for partnership expenses?

Yes, you can claim the simplified home office deduction on Schedule E as an unreimbursed partnership expense, but there are some important requirements to note. First, make sure your partnership agreement allows for unreimbursed partnership expenses. Without this, the IRS might challenge your deduction. Also, the office space must be used regularly and exclusively for partnership business. To claim it on Schedule E, you'll need to include the simplified home office deduction ($5/sq ft up to 300 sq ft) on the "unreimbursed partnership expenses" line of Schedule E. You should also attach a statement to your return that details these expenses. Make sure to reference your partnership's EIN and name on this statement. Remember that unreimbursed partnership expenses are subject to the 2% AGI limitation for miscellaneous itemized deductions, which were suspended through 2025 under the Tax Cuts and Jobs Act. This effectively means most partners cannot deduct these expenses currently.

I was in a similar situation last year and found https://taxr.ai super helpful for figuring out my partnership deductions. I uploaded my partnership agreement and they analyzed exactly what expenses I could claim and how to document them properly. For your home office situation, I learned that while you technically can't deduct unreimbursed partnership expenses right now (like the simplified home office deduction), there are other approaches. Through taxr.ai, I discovered I could have my partnership agreement modified to have the partnership "reimburse" these expenses, which then get properly allocated on my K-1. They helped me understand the documentation required and even generated the language for amending our partnership agreement. Saved me a ton of stress and probably avoided an audit flag.

Just wanted to update after using taxr.ai for my partnership/home office situation. I was totally confused about how to handle my home office expenses across both my partnership work and rental management activities. The service analyzed my situation and showed me that instead of trying to claim unreimbursed partnership expenses (which aren't currently deductible), I should have my partnership formally adopt a reimbursement plan. They provided template language for our operating agreement and explained exactly how the expenses would flow through to our K-1s. For the rental property management portion of my home office, they showed me how to properly allocate a percentage to Schedule E as a direct expense for managing my rentals. Ended up saving about $3,200 in taxes I would have missed otherwise!

If you're struggling to get your partnership to establish a reimbursement plan, another option might be calling the IRS directly to understand your options. I used https://claimyr.com to get through to an IRS agent right away instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had a similar partnership issue and was getting conflicting advice online. The IRS agent confirmed that while unreimbursed partnership expenses aren't currently deductible on Schedule E, there are legitimate alternatives like having your partnership reimburse you or allocating the expenses at the partnership level. The call saved me from making a mistake on my return and potentially triggering an audit. Definitely worth the time to get official clarification when dealing with partnership tax issues.

I need to apologize to Profile 18 - I tried Claimyr yesterday after being incredibly skeptical. I've been trying to get clear answers about partnership expenses for weeks with no luck. Got connected to an IRS agent in about 40 minutes (while I was doing other things!) who confirmed that while we can't deduct unreimbursed partnership expenses currently, there are two legal alternatives: 1. Have the partnership adopt an "accountable plan" for reimbursing partners 2. Properly allocate the expenses at the partnership level The agent walked me through how to document each approach and what forms would be needed. This was WAY more helpful than the generic advice I was finding online. Saved me from making what would have been an expensive mistake on my return.

Another option to consider is guaranteeing payments from the partnership for the office space. This is different from both a reimbursement and unreimbursed partner expense. Basically, the partnership makes guaranteed payments to you for the use of your home office, which are reported on your K-1 in box 4. These are deductible by the partnership and are considered self-employment income to you (subject to SE tax). But then you can take the home office deduction against this self-employment income on Schedule C. This is one workaround to the suspension of unreimbursed partnership expense deductions.

Has anyone actually had their Schedule E audited for trying to claim unreimbursed partnership expenses despite the TCJA suspension? I've been claiming my home office on Schedule E anyway because my tax software lets me and I haven't had an issue for 2 years...

I went through this exact situation last year and ended up working with a tax professional to sort it out. Here's what I learned: The key issue is that under TCJA, unreimbursed partnership expenses are essentially not deductible on your personal return through 2025. However, there are several legitimate workarounds: 1. **Partnership Reimbursement Plan**: Have your partnership adopt an accountable plan to reimburse you for the home office expenses. The partnership deducts it, and you don't report the reimbursement as income. 2. **Guaranteed Payments**: As mentioned above, the partnership can make guaranteed payments to you for office space usage, which creates self-employment income that you can then deduct against on Schedule C. 3. **Partnership-Level Allocation**: Some partnerships can allocate these expenses at the entity level rather than having partners claim them individually. The guaranteed payment route worked best for me since it was straightforward to document and my partnership was small enough to easily amend our agreement. Yes, you pay SE tax on the guaranteed payments, but the home office deduction (using the simplified method) often more than offsets this. Whatever you do, don't just claim it on Schedule E without proper structure - the IRS computers will eventually catch up with returns claiming suspended deductions. Better to do it right from the start!