home office for an SMLLC disregarded entity — §280A still works right?
client is an SMLLC taxed as disregarded entity. Schedule C filer. wants to claim home office.
because the LLC is disregarded for federal, the home office is treated as if the sole prop owns it directly. §280A applies normally. Form 8829 (or simplified method) attached to Schedule C.
where it gets interesting: the LLC has a separate bank account and the "business" pays rent to the owner for the home office. federally that rent is a wash (pass-through, disregarded). but some states (CA specifically) might look at it differently at the entity level.
anyone actually seen CA treat this differently? my instinct is no — disregarded for federal = disregarded for CA personal income tax under R&TC §23038.
2 replies
your instinct is right. CA follows federal classification for SMLLCs — disregarded federally = disregarded for CA personal income tax. the "rent" paid within the entity is a wash at both levels.
what CA does do: treat the SMLLC as a separate entity for the $800 franchise tax and LLC fee. but that's entity-level, not personal-income-tax level. the Schedule C treatment of home office is unaffected.
one thing to watch: if the LLC ELECTS S-corp status (2553), the rent becomes a real transaction — §280A(c)(6) explicitly DISallows home office deduction when you rent to your employer (including your own S-corp). Augusta rule is different because that's 14 days only.
yep — filing Schedule C, 8829 attached. no weirdness.
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