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drzaiusdrzaius | January 31, 2009 01:11 AM | in Tax Deductions

08 Taxes: My home office is 20% of my home. May I depreciate 20% of the entire cost, or just the improvement?

I understand that I may depreciate the percentage of my home that I use for my home office as a tax deduction. Currently, that is 20% of my total home square footage. For the 2007 tax year, I only depreciated the 'improvement value', meaning the assessed value of the construction itself independent of the land value at the time of purchase. The reasoning was that land does not depreciate for tax purposes. This year, turbo tax has asked for the ENTIRE cost of the home (land + improvement value) -- not just the 'improvement value'. Is it a safer bet to stick with the 'improvement value' figure I used last year or use the full purchase price (land + improvements) and amend last year's return?

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BEST ANSWER chosen by asker | coach-b | January 31, 2009 04:19 PM

I'm sure you will get answers to this question, but CCH (commerce clearning house) publishes a very helpful CALCULATOR that allows you to "plug-in" your own numbers and receive guidance. Be careful, as you know, because home office deductions is an active area for the IRS audit staff as it tends to be miscalculated and sometimes intentionally abused by taxpayers. See the following site:

http://taxguide.completetax.com/text/c60s15d425.asp

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ssmacd | January 31, 2009 04:20 PM

Land is not depreciable. Form 8829 asks for the total value, including land, and then the value of the land, which it then deducts from the first number. You can go into "Forms View" in Turbo Tax to check and see where the information you're providing them is being dropped into the form. If its is not calculating correctly, you can "overide" the automatic entries, and insert the correct numbers yourself.

source(s):
http://www.irs.gov/newsroom/article/0,,id=108138,00.html
http://www.irs.gov/pub/irs-pdf/i8829.pdf

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