Home Office Depreciation Percentage?

[easyxpress]

This is regarding Form 8829, Part III, Line 41: Depreciation percentage.

According to the IRS Form 8829 instructions, the percentage for my home office should be 2.564% because I first used the home for business after May 12, 1993 and before 2020.

After entering all the data into the 2021 TurboTax Home & Business, this particular line shows the percentage of 3.6364%. I couldn't figure out why this is the case. Is this a bug in software?

Regards,

Joseph

[ThomasM125]

I'm not sure how you calculated the 2.564%, but the percentage that you use the home for business should be the square footage of the office space divided by the total square footage of the house. You were asked to enter those figures when you went through the home office deduction. Can you clarify if those amounts line up?

[easyxpress]

Thanks for you quick reply.

No, I didn't calculate the 2.564%, it is STATED in the IRS Form 8829 Instructions for Part III, Line 41. This is not the square footage percentage.

In prior years, the software used the 2.564% (correctly) as stated in the IRS form. But this year (2021) is different, a different % is used in the software, although the 2021 IRS Form 8829 STILL indicates 2.564% should be used. 

I think this percentage is related to the 39.5 years depreciation period. So I am not quite sure why the software got changed this year.

[ThomasM125]

Ok, I thought you were referring to the entries for the home in the home office section of TurboTax.

I agree that the instructions to form 8829 indicate that 2.564% would be the correct percentage to enter. I looked up the source of that entry in TurboTax and it says it comes from the IRS instructions. My only assumption is that the number may have been modified by the IRS and the instructions have not been updated yet. 

I also noticed that the depreciation entered on line 42  is not necessarily calculated based on the percentage listed on line 41, but comes from the allowable depreciation as listed on line 10 of the form 8829 asset entry worksheet. So, the percentage does not necessarily factor into the depreciation deduction. So your depreciation entry should be correct and you can verify that by looking on the asset entry worksheet.

[gmaislin]

I have a similar but difference problem.  The home office depreciation is populating Line 42 at all!.  Line 40 is $85,000 and line 41 is 2.5641% and so line 42 should be $2179 like prior years. But nothing gets transferred over.  This seems like a bug and I can't figure out how to report this as such.   I can override to get the additional deduction, but i get a warning that overriding line 42 can cause inconsistencies and troubles with electronic filing.   hmmmm.   I can't find any mention of this particular problem anywhere.

[ZoltanB45]

Do you otherwise have a net profit on the business? The home office will only reduce your income to zero and remaining amount will be carried over.

[gmaislin]

Thank you for your response.  I think I figured it out.  Turbotax incorrectly filled out line 10 of Asset entry.  The amount it filled out was over $200,000 but the business basis is only $85,000.  It was as if Turbotax ignored that that the business basis is only 25% of the total value.   There is a note assoicated with Line 10 Prior Depreciation that says, if blank, prior depreciation from Asset Life History is used.   That's exactly what I want!  So all I had to do was blank out the erronious value populated by TurboTax.  I do believe this is some sort of bug.