Home office reimbursement for LLC members (taxed as partnership)

[Lisa Marie]

Hi, my husband and I are the only two members of an LLC (partnership status for tax purpose). The LLC owns a property outside the state where we live. We have a dedicated office in our primary home that we use exclusively for LLC related activities. We purchased the property in Jan 2021, so tax year 2021 will be our first tax return.

My question is about the reimbursement of the home office expense.  We have read various articles and watched various Youtube videos and are getting conflicting messages.  

1. Is it legal as a partner of the partnership to be reimbursed by the LLC for the home office expenses? We have established an Accountable Plan and a reimbursement policy, which governs how we reimburse ourselves when we travel from home to the property to do maintenance and repair work, or when we buy supplies for the property. We file an expense report every time and get reimbursed, using receipts for purchases, and IRS mileage for driving our cars and per diem rate for meals. (I used to work as a bookkeeper at a company, so I have been using my previous employer's travel/reimbursement policy as the template for our LLC.)

So the key question is: Is it legal to be reimbursed for the home office expenses as members of an LLC? Can we file an expense report in the same way as the travel expense?

3. By the way, we prefer to go through the reimbursement route instead of taking a deduction on Schedule E -- based on what I have researched, we would actually get more money, and it's cleaner and hopefully would rouse less suspicion from IRS examiners.

4. I know there are multiple ways of calculating the home office expense.  Based on what I learned from the internet, it seems that the best way is to count the number of rooms in the house and take a percentage of the total household expenses, i.e. we have 4 bedrooms, 1 living room, 1 dining room, 1 kitchen, 1 office, so the office expense should be 1/8 of the total expenses, including property tax, utility, home insurance, etc.  

5. I plan to wait until the end of December to do the home office reimbursement for the year, since I will need to know the exact amount of utility expense for the year.  I won't know the Dec utility expenses at the time of the reimbursement, but I plan to estimate it based on Nov's utility expenses.  Is that ok?  Alternatively I could wait until Jan 2022 to reimburse myself for the 2021 home office expenses, but it will become a part of the 2022 P&L calculation, so it will not help us to reduce our taxable income for 2021.  

6. Since my husband and I are both using the home office and we are the two members of the partnership LLC (it's set up with him having 75% and me having 25%), do we have to get reimbursed for the home office expenses along the ownership percentage, i.e. he gets 75% of the reimbursement and I get 25%? Or can I just file one reimbursement form and get the whole thing and he will not get any reimbursement? Our income tax return will be married filing jointly, so it doesn't matter for us if he gets 75% and I get 25% or I get 100% and he gets 0, but does it matter as far as the tax return for the LLC is concerned?

I know we have several CPAs frequenting this forum.  I am probably going to hire one of them to prepare the partnership 1065 and K-1 in 2022, but I don't have a CPA right now.  I don't want to wait until we hire a CPA in 2022 and then discuss this issue with him/her at that time.  I want to make sure we have the proper procedures in place and be able to take the reimbursement before the end of 2021.

I would really appreciate any feedback on the plan I have outlined.  Thank you for all your help.

Lisa