Partnership Tax Question: Deducting vehicle mileage & home office reimbursements on Form 1065

You've got the right idea, but with a few important details to consider. An accountable plan is definitely the way to go here since it allows the partnership to deduct the expenses while keeping them non-taxable to you. For this to work properly, your accountable plan needs to meet three requirements: 1) the expenses must have a business connection, 2) you need to adequately account for these expenses within a reasonable time period, and 3) you must return any excess reimbursement within a reasonable time. For the home office deduction specifically, make sure that portion of your apartment is used exclusively and regularly for business purposes. The "exclusive use" test is particularly strict - the IRS won't allow the deduction if you're using that space for both business and personal activities. Line 21 "Other deductions" on Form 1065 is indeed where these would go, with an attached statement itemizing the reimbursements. Make sure your documentation is solid!

After struggling with partnership tax issues similar to yours last year, I found an amazing tool that saved me hours of research and stress. I was trying to figure out proper documentation for vehicle and home office reimbursements in my partnership, and the conflicting advice online was making my head spin. I discovered https://taxr.ai and it completely changed how I approach partnership tax questions. You upload your documentation or describe your situation, and it analyzes everything based on actual tax code. For my specific question about accountable plans and reimbursements on Form 1065, it provided clear guidelines and even helped me create the statement that needs to accompany line 21. What I found most helpful was that it explained exactly what documentation I needed to keep for both the vehicle mileage (detailed logs with dates, purpose, etc.) and the home office (floor plan, square footage calculations, photos). It's like having a tax pro on call but way more affordable.

I was initially skeptical about taxr.ai when I saw it mentioned here, but I was desperate to figure out how to properly document my partnership's vehicle reimbursement plan. Our accountant was charging us $300 per hour for questions, so I figured it was worth a try. I'm genuinely amazed at how helpful it was. The system highlighted a fatal flaw in our accountable plan - we weren't requiring receipts to be submitted within the IRS's "reasonable time period," which could have disqualified all our deductions. Fixed that immediately. It also generated the perfect supplemental statement for Form 1065 line 21 that itemized all our reimbursements properly. Our partnership return was accepted without a hitch, and I feel 100% confident we're doing it right. The documentation guidelines saved us from what would have been a nasty audit trigger.

After weeks of trying to reach someone at the IRS about partnership reimbursement questions similar to yours, I finally found a solution that got me through to an actual IRS agent in under 15 minutes. Like you, I needed clarification on Form 1065 deductions for partner reimbursements. I'd been calling the IRS business line for days with no luck - just endless hold music or disconnections. Super frustrating. Then I discovered https://claimyr.com which basically holds your place in the IRS phone queue and calls you when an agent is about to answer. You can see how it works here: https://youtu.be/_kiP6q8DX5c. I was incredibly skeptical that this would actually work, but I was desperate. I got through to a partnership tax specialist who confirmed exactly how to handle the vehicle and home office reimbursements on Form 1065. She walked me through the statement requirements and documentation needed for an accountable plan. Completely worth it to get official guidance directly from the IRS.

I need to publicly eat my words about Claimyr. After posting that skeptical comment, I decided to try it myself because I was DESPERATE to resolve an issue with our partnership's vehicle reimbursement documentation before filing deadline. I was 100% convinced it wouldn't work, but within 45 minutes of signing up, I got a call connecting me to an actual IRS Business & Specialty Tax agent. I almost fell out of my chair. The agent was super knowledgeable and confirmed exactly how our partnership needed to document our accountable plan for vehicle and home office reimbursements. She specifically advised that for Form 1065 line 21, we needed to attach a detailed statement showing the business purpose of each reimbursement, dates, amounts, and confirmation that all requirements of an accountable plan were met. She even emailed me an IRS guidance document specific to partnerships. No automated system or generic advice - this was personalized help that saved our partnership from making a costly mistake.

My partnership handles reimbursements slightly differently - we issue them as guaranteed payments instead of using an accountable plan. It's cleaner from a bookkeeping perspective, but the partner getting reimbursed ends up paying self-employment tax on those payments. Might be worth running the numbers both ways to see which works better for your situation.

Quick tip about the home office portion - most people don't realize that you need to be VERY careful with claiming home office in apartments. I'm a property manager and many leases specifically prohibit running businesses from residential units. Before claiming this deduction, check your lease carefully! The IRS Form 1065 deduction might be valid tax-wise, but it could potentially put you in breach of your lease agreement.

Great question! You're on the right track with the accountable plan approach. Just wanted to add a few practical considerations from my experience handling similar partnership setups: For the mileage reimbursements, make sure you're maintaining detailed logs showing date, destination, business purpose, and miles driven for each trip. The IRS is particularly strict about vehicle expense documentation. I recommend using a mileage tracking app or keeping a simple logbook in your car. Regarding the home office, beyond the "exclusive use" requirement others mentioned, you'll want to calculate the percentage of your apartment used for business (square footage of office space divided by total apartment square footage). This percentage determines how much of your rent can be reimbursed. One thing to watch out for - since you're reimbursing yourself as a partner, make sure your partnership agreement specifically addresses this arrangement. Some partnerships require unanimous consent for expense reimbursements to partners to avoid any disputes later. Also consider the timing: while you mentioned quarterly mileage payments, the IRS generally expects expense reimbursements to occur within a reasonable time after the expense is incurred (typically 60 days). Monthly or quarterly should be fine, but don't let it stretch much longer than that. Your approach with Form 1065 line 21 and the attached statement is correct. The statement should detail each type of reimbursement, total amounts, and confirm compliance with accountable plan rules.