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Old 02-20-2010, 07:13 PM
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Question related to home office expense and depreciation and energy credit

We have a sole proprietorship in our home and in tax year 2009 we did a little remodeling in our unfinished basement (which is not part of the home office). We put up some outside walls and insulated them. My question relates to the different areas of being able to take this is a business expense, home improvement deduction and as an energy tax credit.

(1) Can I take the work that we did in the basement as a "repair and maintenance" expense on the 8829?

(2) Can I take the work that we did in the basement as a "Home Improvement" which is depreciable and would increase the depreciation deduction for the sole proprietorship (I believe it's form 4562)?

(3) I've already determined that I can take the material cost of the insulation as a Home Energy Efficiency credit on the 1040 (line 52). I would get a percentage of the material cost as a direct tax credit.

I think I can assume that answer the question 1 is 'no', as it's not a repair or maintenance, but wanted to get others' advice.

My biggest question is: Can I take the entire cost of the basement work (including the cost of the insulation) as a "Home Improvement" expense? (which would give me a larger deduction on the 8829 for Home Office expenses) AND still take the tax credit for the insulation on line 52 of the 1040?

I'm only getting a percentage of the deduction on the 8829 and a percentage of the insulation cost for the tax credit. But might this be considered "double dipping"? I can't seem to find anything out there to answer my question specifically.

Thanks so much for the help!

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