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Old 02-16-2008, 12:17 AM
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I have a home business and would like to know if I can omit depreciation on my home?

I have a business operating from home, that is I have a home office.

My question is whether or not I can deduct my direct expenses like mortgage, utilities, home insurance etc., but not deduct depreciation, so that when I eventually sell this home, I would not be required to recapture the depreciation?



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Old 02-17-2008, 10:05 PM
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I have a home business and would like to know if I can omit depreciation on my home?

According to the tax law, "if you qualify to deduct expenses for the business use of your home, you can claim depreciation for the part of your home that is a home office."

The amount of depreciation one can claim is not really that significant, "as the part of your home that is a home office is depreciated over a recovery period of 39 years using the straight line method of depreciation and a mid-month convention."

Now, it seems that you do not wish to claim depreciation on that part of your home that is a home office. But, the tax law still requires you to "reduce the basis of your home for the allowable depreciation of that part of your home that is a home office" when reporting the sale of your home.

Thus it seems, from the tax law that if indeed you do end up selling your home in the future, irrespective of whether or not you have claimed a depreciation for the part of your home, you will have some recapture depreciation that will reduce the cost basis of your home.

With the current tax law, most taxpayers will avoid paying capital gains tax on the sale of their principal home given the current provision under Code Section 121(a), allowing $500,000 capital gains tax exclusion, for married filing jointly, and $250,000 for Single tax filiers.

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