How to Deduct Home Office Expenses in an S Corporation
A large number of small S corporations use the home office of one of the shareholders (or the sole shareholder) as their principal business office, which is used exclusively and regularly for corporation business. The costs related to this home office can be handled for tax purposes in a number of different ways, but generally the easiest method and the one that results in the most favorable tax treatment for the corporation/shareholder is for the corporation to reimburse the shareholder under an accountable expense reimbursement plan. Under this arrangement, the corporation will reimburse the shareholder for the home office costs on a monthly or other agreed upon basis. The amount the corporation pays is a deductible business expense, and, because the reimbursement is under an accountable plan, the reimbursement is not included in the taxable income of the shareholder. As an accountable expense reimbursement, the shareholder must keep track of the actual expenses of maintaining th...