Business Use of Home

[peggysioux]

In figuring the 8829, is the depreciation portion optional or if taxpayer takes the home office deductions, would the depreciation be considered "allowed or allowable" if he later sells the residence?? New client took the home office deduction in 2005, but CPA did not deduct depreciation expenses and in 2006, client sold residence. Do I need to figure the "allowable" depreciation?

[JG EA]

Allowed or Allowable

Publication 587:

Depreciation. If you were entitled to take depreciation deductions because you used your home for business, 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 deduction allowed was less than the amount allowable, the amount you cannot exclude is the amount allowed.

[jainen]

sleeping in my office

How come my competitors get a deduction for business use of home, but I don't get a deduction for sleeping in my office?

[OldJack]

>>If you were entitled to take depreciation deductions <<

Therein lies the rub! Some folks say you can't take the business use of your home unless it fully qualifies including depreciation and others say if it is the primary business office it doesn't have to qualify with depreciation. Since no depreciation was allowed or allowable per the prior client and CPA determination, I would not call it allowable now and make the taxpayer pay tax on it.

[peggysioux]

Business Use of Home

So, is the depreciation deduction optional if taxpayer takes home office deductions?? Some clients might chose to not take the depreciation deduction if they thought they might sell their home in the near future so that all would be tax free and not be subject to the 25% unrecaptured 1250 tax on depreciation. It sounds like from publication 587, if you can show adequate records that no depreciation was taken, than you don't have to claim the "allowable" portion of depreciation. Any input is appreciated!!!

[Bill Tubbs]

All or nothing

My take is "all or nothing". Either the space qualifies for the deduction or not. That goes for the mortgage interest, property tax, utilities, and depreciation -- I either deduct all or none.

Bill

[peggysioux]

Business Use of Home

I also thought that if a taxpayer qualified for the home office deduction and chose to take the deduction, he had to also take the depreciation - as Bill stated - all, or nothing. But, after I saw previous tax preparer handle the depreciation a different way, I thought maybe I was incorrect. Any clairification would be appreciated!

[Gretel]

I agree with Bill. If qualified home office than depreciation is mandory. Well, not the depreciation but recapture at sale.

However, if taxpayer never got benefit of depreciation because of business losses, then this depreciation is not considered allowed or allowable.

[OldJack]

This subject has been discussed in detail in other posts. My take is that a business can claim a deduction as its "primary/principal business office" use space in the home even if it does not "qualify because of personal use". If it does not qualify because of personal use it can't be depreciated. The wording in the pub is vague because it is mainly talking about a business use where it is maybe not the only office for the business or it is an office for an employee. Search the forum and you will find in depth discussion with reference to cites.