Home office is 33% of home. Purchased new A/C this year ($16,000), new water heater ($2,400) and new garage door ($1,500) for the house. Where do I enter these expenses in turbotax?
The new A/C unit should be added as a depreciable asset. You have a choice in handling the expense of the water heater and garage door:
- You can enter them as assets and depreciate them over time; OR
- Since the value is under $2,500 (the portion attributable the home office), you can claim the cost as expenses under the de minimis election.
To enter the expenses and assets for your home office, please follow these steps:
- Click on Income and Expenses and then click the Start/Revisit box in the Self-Employment section.
- On the Your 2020 self-employed work summary screen, click on Edit next to your business.
- If you've already started to enter information on your home office, in the EXPENSES section click on Edit next to Home Office. On the Home office summary, click Edit next to your office.
- If you haven't started, on the Here's your [business] info screen, click on the box Add expenses for this work.
- On the next screen click the radio button next to Home Office and click Continue at the bottom of the screen.
- Continue through the interview, entering the requested information.
- On the screen, There's a simple way to get this deduction — do you want to take that?, mark the box No, I want to take actual expenses.
- On the screen, Expenses for [XX]'s home office, mark the radio button that all of the expenses apply to the entire home.
- If you want to take the water heater and garage door as expenses (rather than depreciate them) you can enter them on the Enter repair expenses screen. Enter the entire expense and TurboTax will calculate the amount allocated to the home office.
- You will be brought back to the Home Office Asset Summary.
- Click Add an Asset to enter the A/C as a depreciable asset.
Yes - I should have mentioned that. You may use the safe harbor to deduct amounts up to $2,500 per invoice or item. The A/C was $16,000 and 33% of that is $5,280, which is above the $2,500 specified for the de minimis election.
Does your business use hot water? If not, the water heater is not a business expense. And the garage door would only possibly be an expense if you use your vehicle for business or your garage is used as part of your office.
I am in agreement with many of the good answers above but as an alternative you might consider using the Safe Harbor for Home Office Deduction.
This is a simplified method for figuring your home office deduction. If you choose to use this method, you cannot claim home office expenses using the regular method. The simplified method doesn’t change who can claim it, but it does simplify your calculations and records.
Highlights of the safe harbor home office deduction:
- Standard deduction of $5 per square foot of home used for business up to 300 square feet (with a maximum deduction of $1,500)
- Allowable home-related itemized deductions you claim in full on Schedule A (Ex: mortgage interest and real estate taxes)
- No home depreciation deduction or later recapture of depreciation for the years you use this method
Additional considerations for selecting the Safe Harbor method:
- You may choose to use either the simplified method or the regular method for any taxable year.
- You choose a method by using that method on your timely filed, original federal income tax return for the taxable year.
- Once you have chosen a method for a taxable year, you cannot later change to the other method for that same year.
- If you use the simplified method for one year and use the regular method for any subsequent year, you must calculate the depreciation deduction for the subsequent year using the appropriate optional depreciation table. This is true regardless of whether you used an optional depreciation table for the first year the property was used in business.
Full details on the new option can be found in Revenue Procedure 2013-13 PDF.