Home Office & depreciation

[LawrenceGR]

Am I missing something or is there a reason someone wouldn't take depreciation on their home office? It has been my understanding that if you have a home office you have to recapture the depreciation weather you take it or not. I have now run into two returns where the last preparer didn't take depreciation, one on a rental, the other on a home office. Any insight would be welcome.

[Larmil]

Am I missing something or is there a reason someone wouldn't take depreciation on their home office? It has been my understanding that if you have a home office you have to recapture the depreciation weather you take it or not. I have now run into two returns where the last preparer didn't take depreciation, one on a rental, the other on a home office. Any insight would be welcome.

Some people do not understand that depreciation is recaptured whether allowed or ALLOWABLE.

[Possi]

i don't think so

The home office is the one time you can choose not to depreciate and not recapture.
~possi

[WhiteOleander]

The home office is the one time you can choose not to depreciate and not recapture.
~possi

Could you show me your source? OIH must depreciate like anyone else.

[Jesse]

The home office is the one time you can choose not to depreciate and not recapture.
~possi

Technically I don't think it is a choice. However, it is easy enough to exclude the deduction mixing some personal activities into the picture disallowing the deduction because the home office is now not 100% exclusive business use - if you know what I mean.

[JCH]

Technically I don't think it is a choice. However, it is easy enough to exclude the deduction mixing some personal activities into the picture disallowing the deduction because the home office is now not 100% exclusive business use - if you know what I mean.

Wouldn't this mean that the 8829 shouldn't be prepared anyway?

[Jesse]

Wouldn't this mean that the 8829 shouldn't be prepared anyway?

Definitely agree with you! Sorry, didn't mean to imply you could take home office expense and choose not to depreciate. It is all or nothing.

[Possi]

depreciate?

Pub 587 says you CAN depreciate.

I was taught that you do not have to depreciate the home office. All my 14 years of doing taxes, I have never questioned that fact. I looked up pub 587 and it does not say you must, but it says you can depreciate home office.

I did not depreciate my own home office when I owned a home. If I still lived there (my ex is there, it is not sold) I would not recapture either. I don't think the IRS would question it or come after me for that, do you?

[JCH]

Depreciation allowed or allowable...see IRC Sec. 1016(a)(2). My understanding is you must take it on OIH...it's not optional.

[Jesse]

I've been wrong before -

but in my opinion I'm in agreement with JCH, it's allowed or allowable, not a choice.

[Roberts]

I was taught that even if you don't take the depreciation, it will be recaptured and yes the IRS will have a problem with it if you don't. My Enrolled Agent prep class was very specific on this issue.

[Possi]

well...

...shoot me runnin'!

I am enlightened!

[taxxcpa]

Is the IRS knocking at your door?

It looks like you may have got by with not depreciating it and the IRS will not ever know the difference. I always depreciate my home office. Even if it wasn't worth the trouble, it is necessary if I'm going to take utilities and other home expenses. The mortgage interest and the real estate taxes are also helpful since it cuts the self-employment tax.

[AZ-Tax]

I have an email reply from the IRS on this same topic

Here is the reply from the IRS Email Tax Law Assistance

The Answer To Your Question Is:
Thank you for your inquiry. Publication 523, Selling Your Home, states on page 17, "If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, the amount you cannot exclude is the amount allowed."

Consequently, you do have to recapture the depreciation regardless of whether you actually claimed it. This is done on Schedule D by reducing the section 121 exclusion amount by the amount equal to the allowable depreciation.

[Larmil]

Time flies

Here is the reply from the IRS Email Tax Law Assistance

The Answer To Your Question Is:
Thank you for your inquiry. Publication 523, Selling Your Home, states on page 17, "If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, the amount you cannot exclude is the amount allowed."

Consequently, you do have to recapture the depreciation regardless of whether you actually claimed it. This is done on Schedule D by reducing the section 121 exclusion amount by the amount equal to the allowable depreciation.

I did not realize it had been over ten years since that law changed. It seems like a couple of years ago.