2007-03-09 02:06:11 · 6 answers · asked by jason d 1 in Business & Finance ➔ Taxes ➔ United States
Not anymore. The IRS used to reclaim some of that deduction on the basis that you sold a depreciated asset for a gain. Not any longer though- you can now sell your house free and clear- answers to the contrary are out of date, Im afraid :)
2007-03-09 02:14:24 · answer #1 · answered by bmwdriver11 7 · 0⤊ 4⤋
If you claim a home office deduction, then you must claim deprecation on the business portion of the home. The IRS rules state if you do not take deprecation that they will tax you on the deprecation that you should have taken.
Any deprecation that is recaptured is for section 1250 property which has a different capital gains rate than any other capital gain (maximum of 25%), this means you can not use the standard capital gains calculation to figure out your tax when the house sells, but need to use the more complicated schedule D worksheet.
There is also the question of how much deprecation did you really claim. Your deprecation deduction is limited based on how much your earnings are. There is a real danger of paying taxes for deprecation that did not occur because of limits.
Home office expenses are not as straight forward as they seem and you will want to consider talking to a tax professional in detail about your personal situations. Some business have different rules.
2007-03-09 03:25:15 · answer #2 · answered by jks_mi 3 · 0⤊ 1⤋
Yes. If you have business use of your home, part of your home is no longer your personal residence. It is business property on which you have taken depreciation.
When you sell your home, the depreciation you took is taken from the gain on your home (even if that gain is excludible as gain on the sale of your personal residence). The depreciation is "recaptured" which means you pay tax on it as if it is your ordinary income.
Added later because of differing answers:
Here is a quoted example from the 2006 IRS Publication Selling Your Home:
Example. Dan sold his main home in 2006 at a $10,000 gain. He meets the ownership and use tests to exclude the gain from his income. However, he used one room of the home for business in 2005 and has records showing he claimed $1,000 depreciation. He can exclude $9,000 ($10,000 - $1,000) of his gain. He has a taxable gain of $1,000.
2007-03-09 02:11:32 · answer #3 · answered by ninasgramma 7 · 2⤊ 1⤋
just to add a fine point to this discussion--even if you didn't actually take the depreciation, the IRS will deem that you did take it because you were entitled to it. so, to use the example from another answer, even if you didn't take the depreciation, you will have the $1000 gain because that was the amount of depreciation that you were entitled to take.
2007-03-09 04:09:08 · answer #4 · answered by Ovrtaxed 4 · 0⤊ 0⤋
No, unless you claim a depreciation deduction as part of the home office deduction. The deduction amount allowed for home office use is a taxable gain.
2007-03-09 02:09:46 · answer #5 · answered by Bostonian In MO 7 · 0⤊ 4⤋
None as long as you buy/rent/lease somewhere else. You are only allowed to deduct a portion of your bills (electicity, heat, internet, phone, mortgage/rent) anyways. The only thing that could affect you is if you have a gain from the sale of your home and were to pocket that money instead of reinvesting it into property.
2007-03-09 02:15:39 · answer #6 · answered by Mandy W 3 · 0⤊ 4⤋