How to calculate the real estate tax allowed in the business use of home deduction, or does Lacerte automate that now?

Forum|Forum|4 months ago
February 9, 2026
1 reply
6 views

In the past, Lacerte has not automated the calculation of the real estate tax allowed in the business use of home deduction. So I have calculated it myself, using the IRS's Publication 587's worksheet for this. The IRS has not yet updated their publication for 2025. With the new state and local tax deduction capped at $40,000 for some taxpayers and phased down to anywhere between $10,000 and $40,000 for others, I need a new worksheet to calculate this portion of the business use of home deduction (the current online version of Pub. 587 still lists the $10,000 cap which directly affects the calculation). The phase-out is particularly challenging to calculate, as this deduction will likely impact the allowed SALT amount on Schedule A - so the calculation is circular. 1) Does anyone know how to calculate the allowed real estate tax on the home office deduction for 2025 and 2) will Lacerte automate this since it is starting to get unwieldy? Thank you.

Lacerte Tax

BobKamman

Level 15

I haven't had to use that Pub 587 worksheet, but is it really needed in most situations? If you pay $5,000 in real estate taxes and you have 20% business use, you get a $1,000 deduction. Problem solved. Or is IRS claiming that you can't start with $5,000 if you're over the SALT limit? Where did they come up with that? If I own a separate building that is used 100% for business, I can deduct 100% of the real estate tax even if it's $100,000.

But if you want to use the worksheet, I think you just need to change $10,000 to $40,000 wherever it appears. And consider it an opportunity to practice your calculator skills.

M

MiriamLAuthor

Level 2

Sorry, that doesn't work for most of my clients. 1) The rule is clear that you cannot take the full home office real estate tax deduction - it is limited depending on where you fall with the SALT (that's what the worksheet is for, and honestly, Lacerte should be automating this). Most of my clients could only deduct a very small portion of their real estate taxes on their home office in the past. 2) I cannot just change the cap to $40K, because taxpayers do not necessarily get to deduct $40K - the allowed deduction depends on AGI (and the home office deduction affects AGI) - which is why this is circular and not just a quick calculation.

BobKamman

Level 15

1) The rule is clear

Really? Where did you find it? IRS publications are not reliable sources.

The only source I could find was a "Program Manager Technical Advice Memorandum" (PMTA 2019-001) from 2019, which is a couple of IRS lawyers telling the IRS publication writers their thoughts on the question. If the question ever reached court, a judge would point out that an IRS memo is just one party's view of the law.

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