If a shareholder has unreimbursed expenses (i.e. home office), can they be deducted?
No, S corporation owners who are active in the business are treated as employees and any expenses would be considered unreimbursed employee expenses. Previously, Form 2106 would have been used to deduct such expenses, however, the TCJA changed the guidelines for Form 2106 and a deduction is no longer allowed.
Per Publication 529,
"You can no longer claim a deduction for unreimbursed employee expenses unless you fall into one of the following categories of employment, or have certain qualified educator expenses.
- Armed Forces reservists.
- Qualified performing artists.
- Fee-basis state or local government officials.
- Employees with impairment-related work expenses"
In Drake Tax, "K1S" is not a selection on the 8829 screen. For information about Unreimbursed Partnership Expenses (UPE) related to a partnership, see Related Links below.
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