Incorrect number in the Home Office section but have already e-filed

[TheWisdom]

I think I made a significant mistake. What does "home's adjusted basis" or "cost of your entire home" mean here? Is it the price the seller agrees to sell the home to the buyer? But I entered the actual amount I paid for it up until today (selling agreed price - outstanding mortgage principal). I feel terrible now because my return has already been e-filed. For next year, if I enter the correct amount, it will be different from the 2022 return. I'm worried that this might cause an audit one day due to the inconsistency or conflict between the years of tax returns.

I need expert advice on what to do now.

[MaryK4]

You should amend your return to correct the depreciation.  First of all, your deduction is smaller than it should be, and you are going to have to report the correct amount when you sell the property.  Also, in your screenshot, you did not include land value.

[TheWisdom]

1. My apologies for the confusion. I didn't sell the property; I still own it, live in it, and use it as a home office. So, what is the correct amount you're referring to?

2. Is the land value on the property tax bill? If yes, there are two land values: market and assessed value. Which one should I enter?

3. Once I have made all the necessary corrections, how can I amend my tax returns?

[TeresaM]

The value of the land is not included in the depreciation calculation because there will not be wear and tear to devalue it because it was being use for business purpose, the way that happens with a building. Land value is often listed on your Assessment which is used for assessing Property Tax but not always. If you need help with that, contact your assessor's office. Or a local Real Estate Broker might also be able to help. The relative value of the land will vary depending on its location. 

For the amendment, this information cannot be changed at this time and you should wait until the return is either accepted or rejected.  If your return is rejected, you will be able to modify before you resubmit.   

If your return is accepted, you can amend, or correct, your return if the original entries need correction. There is no additional charge to use Turbo Tax to amend your federal or state return but you will need to wait until the IRS and your state have finished processing the original return. You do not want two copies of your return there at the same time and sometimes they make adjustments.  

This is a TurboTax Help article with some Do's and Do nots of amending. 

[TheWisdom]

Thank you for the answer! How do I calculate the "Cost of my home"? Even though I clicked on "learn more" and read everything, I still don't understand the concept.

[TeresaM]

This would be the price you paid for your home and then as part of that price, what is the value of your land. TurboTax will subtract the land and get the cost for the building or improvements.  If you use a building for business use, or for rental use, the wear and tear makes it less valuable so the IRS allows depreciation, or a portion of the value each year as an expense for the business. If this is for a home office, it will only be applied to the portion of your home used for the home office. 

When you sell your home, the IRS will recapture the depreciation and expect you to subtract that amount from the original cost of the home, or basis. They will do this whether you have actually claimed the depreciation on your annual tax returns, so it is important to account for this so you do not owe extra tax when you sell the property. 

[TheWisdom]

I purchased my home in 2018 and began using it as a home office in 2020. However, this year (2022) is the first year I am claiming a home office deduction. In my case, what does "at the time you started using it for business" refer to?

I guess it's 2022.

[AliciaP1]

No, you can enter 2020 since that's when you actually started using the home office.

@TheWisdom 

[TheWisdom]

Alright, since the home started being used for business in 2020, the cost of my asset in 2020 should be the purchase cost (Due at Closing), which includes closing costs, and added to that, mortgage, property taxes, home insurance premium, HOA fees, and the cost of any repairs made to the house from 2018 to 2020, right?

[RobertB4444]

The cost basis of your asset in 2020 is what you paid for it in 2018 (including closing costs) and any major repairs or structural improvements between the date that you bought it and the date that you put it into service.  Expenses between 2018 and 2020 are not added to the basis.  

@TheWisdom 

[TheWisdom]

"the date that you put it into service". Excuse me, do you mean the day I start using it for my business?

[HopeS]

Yes, the date you started to use your home office is the date you put it into service. 

See additional information below:

Home Office Deduction

@TheWisdom 

[TheWisdom]

Is the mortgage interest, property taxes, and HOA fees that I have paid from 2018 to 2020 eligible to be added to the cost of entire home?

[KrisD15]

No, those are expenses and are NOT added to the basis (cost/value) of the home. 

Things that can be added would be additions, like a roof or room addition. 

[TheWisdom]

Do I have to file an amended federal and state return separately? I use TurboTax Home & Business software. Could you please guide me on how to file an amended federal and state return?