USA Business use of Home - Expense Carryover Rules?

[bbowens]

Hi,
I have a sole proprietorship in which my carryover expense on Form 8829 is larger than the income generated by the business. However, I would like to use just a portion of the carryover so that I can show enough earned income to claim an IRA deduction.

I've been reading through the instructions, as well as Pub 587, but I've not been able to find any rules describing the limitations for using the carryover in this regard.

Can I use all or part of the carryover in subsequent years as I choose, or, are there restrictions?

Thank you,

Bradley Owens

 

[ColinCPA]

If I understand your question correctly, you are asking if you can optionally postpone a portion of the deduction of your 8829 carryover loss from a prior year? I don't believe so.

I don't think this has been specifically addressed by the IRS, but there doesn't appear to be a way to make such an election. You cannot afford such treatment to NOL's, passive losses, or at-risk losses either as far as I know.

Furthermore, Sec. 280A states the following:

"Any amount not allowable as a deduction under this chapter by reason of the preceding sentence shall be taken into account as a deduction (allocable to such use) under this chapter for the succeeding taxable year.

If you want to utilize the IRA deduction, why don't you just rollover to a Roth?

 

[bbowens]

Hi Colin, thanks for your reply. Sorry mine is so tardy, but the notification went to my junk folder.

Anyway, it looks like your response is the best I can come up with, so far.

I'm interested in your comment about the rollover, however. My rollovers in the past just add to income, but not "earned" income, which is the kind I need in order to qualify for contributing (and deduction) to either Traditional or Roth IRA's.

I'd be interested in your input if I'm missing something, here.

 

[ColinCPA]

That's correct. My suggestion is just that a rollover to Roth would allow you to avoid a nondeductible IRA contribution. No income would be generated by the rollover since you are rolling from one after-tax account to another. But then you won't have to worry about tracking the basis and any earnings would not be subjected to taxation.