How to write off "Home Office/Showroom" Addition?

4 Replies

Hello All,

I know there is a lot of talk about "The Home Office Tax Write Off". This is similar but different ;-)

I am planning on building an addition on my home that would be a great room on the main floor, and ALSO have a finished space in the walk out lower level for an office for both my rental business but MORE so an office/showroom for my 'day job' of construction/remodeling. I will be both doing office work for both businesses and ALSO meeting with clients, subcontractors etc...

I am wondering if these are both possibilities and which might be better, so IF I need to keep track of building costs that are specific to that area I know that going in and getting bids etc...

  • 1) Use the 'square foot method' - this square footage will be approximately 17% of the overall area of the home. Can I take 17% of interest, taxes, utilities, maintenance etc... and use that? I think my total costs are about 18K per year.
  • 2) Could I keep track of what THIS part of the addition project costs, and somehow write that off? I am estimating that this portion (compared to leaving it unfinished basement) will be about 40-50K.

Thanks, Dan Dietz


    You would depreciate your costs using the applicable percentage of whole house items and then you will have depreciation for your actual costs. I think you're thinkin a bit more into it than you need to because you get both. 

    Remember the area must be used "Regularly and Exclusively" for business. 

    Originally posted by @Daniel Dietz :

    Thanks @Steven Hamilton II, that makes sense. I usually like to over complicate things ;-)

    Dan Dietz

     Dan,

    I know you do. but I get it. The whole topic of tax can cause many to over complicate it. 

    You might want to do some what if planning. What I’m thinking about is....

    If you ever sell, you’ll be paying 25% depreciation recapture on those building costs which is probably higher than your regular tax rate so in the end you’ll have to pay more taxes, just later, hopefully much later. 

    If you sell the house and it appreciates enough to cause capital gains, that 17% of the gains will also be taxable, not part of your primary home tax free sale. 

    Just make sure it’s worth it with a little back of the napkin math...