Can you depreciate your home office?
If you have a home office you use exclusively for your business, and you are a sole proprietor, you could either use the simplified method to deduct home office or claim the home office actual expense. If you choose to deduct actual expense of your home office, you could claim the depreciation deduction of your office space as well.
Assuming you live in 1,000 square footage single family home.
You use 100 square footage as a home office.
You decide to claim actual expense of your business use of your home as well as its depreciation.
How do you calculate the depreciation deduction of your business use of your home?
The home office in a single-family home is considered a nonresidential property. Therefore, you would depreciate it in 39 years assuming you started in 2020.
What is the purchase cost of your home?
What was the cost of the land?
What is the improvements cost? assuming you have your home before 2020.
What is the market value of your home in 2020 when you started the business?
Basis for your home: use the lesser of (the cost of your home – the land + any improvements) and the market value of the home when you convert a part to home office.
Basis for depreciation: Basis of your home*100/1,000 square feet
As an example: if your basis is $100,000, the basis for depreciation of your home office is $10,000 (100,000*100/1,000)
The depreciation rate table is in Appendix A Chart 2 of Publication 946 (2019). That is Table A-7a.
Use the rate from the column that corresponds to the month you converted a piece of your home into an office for your business. In this example the column with 1 on top for month.
With the depreciation spreadsheet, calculate the depreciation deduction for your home office as instructed in the video.
The first year depreciation deduction of your home office would be entered on Form 4562 Part 3 Section B line 19 i-nonresidential real property.
Depreciation Spreadsheet-DS22821
2020 Federal Tax Forms and Instructions
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