ProConnect is refusing to let me use the simplified method for a home office used to manage a taxpayer's Sch E rental properties. If I try to associate a business use of home deduction with a Schedule E, it gives me this message:
"The simplified method is selected on a home office for a rental property. The simplified method is not allowed for rental properties. The program is using actual expenses instead. See IRS Publication 587 for more information."
This seems to be based on a misinterpretation of pub 587. Pub 587 says this:
"Rental use. The simplified method does not apply to rental use. A rental use that qualifies for the deduction must be figured using actual expenses. If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use."
When they say "rental use", they're referring to someone renting out part of their home, and in that case you have to deduct actual expenses (which normally happens on Sch E itself). They're referring to someone using a home office to manage their own Sch. E rental properties and calling that "rental use". There is more clear info on this in rev proc 2013-13, which is what the simplified method is based on.
There is a work-around where you can calculate the home office deduction manually and enter it as an expense on Schedule E. But this issue should be fixed in ProConnect.
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