Discussion:Home office deduction
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Discussion Forum Index --> Tax Questions --> Home office deduction
| 23 February 2006 | |
| For the first time this year, I had included a home office deduction via Form 8829 on my tax return (for a home office portion strictly used for my accounting & tax business). I know this is a red flag to IRS, but all expenses are ligitimate. At the end I was only able to deduct a little over $1000. Should I even bother? The reason I included is that I heard if sold the house we would have to include the depreciated amount taken as capital gain, EVEN if I did NOT include depreciation that should have been taken and allowed. True? | |
| 23 February 2006 | |
| Would only have to recognize gain to the extent of depreciation claimed. See paragraph 1705 CCH Master Tax Guide, page 546. | |
| 23 February 2006 | |
| Skhyatt is correct, just the depr is recaptured, whether deducted previously or not. As for red flag - not really anymore, it's so easy to qualify, I wouldn't say it's a red flag at all anymore. Is it worth it? If you're filing a Sch C, I think it is, not only to get some deduction for utilities, ins, repairs, but also when that deduction is saving you SE tax and you can also shift some mortg int and property tax to Sch C (vs A) and save some more SE tax, it can easily be worth a few hundred bucks in tax savings. It also removes any doubt to deducting mileage for every time you leave your house. That might be the most significant reason to claim it. | |
| 23 February 2006 | |
| Bean, you are correct. Sec. 121(d)(6) requires the recapture of “depreciation adjustments” as defined in Sec. 1250(b)(3). Sec. 1250(b)(3) defines depreciation adjustments as the depreciation allowed or allowable (claimed or should have been claimed). | |
| 23 February 2006 | |
| Riley2: In the CCH paragraph I quoted, is the MTG wrong where it says "depreciation claimed"? | |
| 23 February 2006 | |
| Interesting, the CCH guide refers to depreciation claimed and the code refers to depreciation adjustments as you stated Riley2. The guide even quotes the same code section, but clearly it is not 100% accurate. Or am I reading it wrong? | |
| 23 February 2006 | |
| Thanks Riley2! Just what I needed to know! Although I don't understand why we have to report a gain later if we never claimed depreciation - just doesn't make sense to me. As you said, Skkyatt, not 100% accurate. I decided to email IRS and the response I got was as Riley2 had mentioned - whether allowed or allowable, so they encourage me to take the claimed if it is allowed to me. Does that answer anything? | |
| 23 February 2006 | |
| If you don't have a home office deduction then you cannot deduct mileage either? | |
DR BRISKET (talk|edits) said: | 24 February 2006 |
| You can deduct business mileage whether you have a home office or not. However, with a home office, every time you drive anywhere for business, the odometer starts turning for business mileage the minute you pull out of your driveway. However, if you have an office away from home, your trip from home to that office would be non-deductible commuting mileage. | |
| 25 February 2006 | |
| Bean: so you saw the same thing in the MTG that I saw? Where it says "depreciation claimed". To me that implies depreciation actually taken. Seems like the wording should have been depreciation "available" or "allowed or allowable" as I think it says in the code. Kind of surprised that the MTG would make this kind of "mistake"? In another book of theirs, in a discussion HOH, they seem to be saying that a QR can qualify you for HOH without putting in the exception about being a QR, simply if they live in the same household for the year. Am I being too picky here? I know that nothing is perfect. | |
| 25 February 2006 | |
| Boy, the tax laws sure leave lots of room for interpretation, doesn't it?
I hear you. Since IRS had documented to me (via email) that it is depreciation allowed whether or not taken, I decided to proceed with it. However, this is not the same treatment for vehicle expense. That's another discussion. | |
| 26 February 2006 | |
| I'd be interested in your thoughts regarding my posts above regarding the MTG. | |
| 27 February 2006 | |
| Does a self-employed TP have to meet the qualified home office test in order to deduct transportation expenses? I always thought and still do, that if a self-employed person uses their home as their principal place of business,(works from home 100%)regardless if they deduct certain "home office" expenses, that they could always deduct auto expenses/mileage. | |
| 27 February 2006 | |
| I use my office for business and personal use and my husband uses the same office for administrative work per his employer's request. I have not deducted home office expenses in the past because I feel like the rules are strict when it comes to exclusive use. Will I still have to recapture depreciation when I sell? Can I deduct home office expenses and if so do I include all expenses on schedule c even though my husband uses it too. | |
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