Client converted 25% of his basement to a home office. Can Section 179 be taken on the capital improvements that he made to convert the basement to a home office? Thanks in advance.
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You cannot take the Section 179 expense for real property or for improvements to it. See TTB page 9-14 for their discussion of this topic. -
Home Office depreciation recapture
Just remember when you take Home Office, that although you will get a deduction for depreciation, when the home is sold, all that depreciation to the extent of allocated gain will be reported on a 4797 and be taxable up to 25%
I just did one where for ten years the depreciation deduction was $2,000 per year. Now the home is sold at a huge gain, and look what is looming, a $20,000 taxable gain. While the $2,000 annual depreciation was great, no one likes the recapture of the entire amount upon sale.
Also, if you take home office, and you decide not to take depreciation, the IRS could make you recognize the gain "as if" you had taken the depreciation.Comment
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