Carpenter remodeling home kitchen as show room

[JBP]

I have a self-employed carpenter who does kitchen/bath remodels. He is going to remodel his own kitchen to use as a show room and space to meet with clients.

He doesn't have another show room or meeting space, but we use exclusive home shop/office space on 8829. His family kitchen does not qualify for 8829 because it is not exclusively used for business.

Thoughts on whether any of the remodel expense can be deducted for business on Schedule C? He paid a designer in 2023 with the kitchen renovation scheduled for 2024.

[Uncle Sam]

Won't these costs increase his cost basis for the Section 121 exclusion when he sells the house? He can't then also claim business expenses on Schedule C.

[spanel]

Why stop there??? Build a new house and write off the entire thing as a home builder?

Chris

[New York Enrolled Agent]

I have a self-employed carpenter who does kitchen/bath remodels. He is going to remodel his own kitchen to use as a show room and space to meet with clients.

He doesn't have another show room or meeting space, but we use exclusive home shop/office space on 8829. His family kitchen does not qualify for 8829 because it is not exclusively used for business.

Thoughts on whether any of the remodel expense can be deducted for business on Schedule C? He paid a designer in 2023 with the kitchen renovation scheduled for 2024.

Thoughts - I hope the spouse is a good cook to make great meals in their new kitchen.

Further thoughts - Section 262 (no deductions for personal expenses) always overrides Section 162 (deductions for trade or business expenses).

[TaxGuyBill]

?280A(a):

Except as otherwise provided in this section ... no deduction otherwise allowable under this chapter shall be allowed with respect to the use of a dwelling unit which is used by the taxpayer during the taxable year as a residence.


So unless something falls into one of the exceptions in ?280A (for example, an office used regularly and exclusively for business), there is no deduction for their personal residence.

https://www.law.cornell.edu/uscode/text/26/280A

[terryats]

If he already is using the 8829 on another space that is exclusive to his business then I would think it would be an indirect expense on that 8829

[FEDUKE404]

If he already is using the 8829 on another space that is exclusive to his business then I would think it would be an indirect expense on that 8829

OK, for the sake of discussion, I'm game.

WHAT would constitute an "indirect expense" for the kitchen in one's own residence? "Regular and exclusive use" is always lurking out there. Maybe open a home day care business could be considered also?

Actually I like spanel's response. As a "home builder," why not just try to write off the cost of the entire building as an "office"? Maybe even consider the various costs of running a home to be "business deductions" with the family members on the payroll. Their dog can even be treated as a "security expense."

OTOH, maybe 04/01/2024 is just making an early appearance with this thread?

FE