We built a new separate workshop on our property for Business. Where do I deduct the cost of the workshop in home & business.

[ColeenD3 · Accepted solution]

You will depreciate it. Enter it as an asset.

You may qualify for the Improvements Election of Safe Harbor.

Improvements Election

This election is an option you can take each year that lets you write off some building improvements as expenses instead of assets. 

Here are the rules you need to meet to take this election:
 

• Your gross receipts, including all your other income, are $10,000,000 or less.
• Your eligible building has an unadjusted basis of $1,000,000 or less.
• The cost of all repairs, maintenance and improvements is less than or equal to the smallest of these limits: 

• 2% of the unadjusted basis of your building or
• $10,000

This election for building improvements is called the Safe Harbor Election for Small Taxpayers. If you decide to take this option, a form called Safe Harbor Election for Small Taxpayers will show up in your tax return. This election will apply to all your businesses, rental properties or farms.

[bailey7223]

What if you started the build at the end of the year and finished in 2022? How do I enter that?

[Carl]

You enter nothing concerning this on your 2021 tax return, since the building was not placed "in service" in 2021. You'll deal with it on your 2022 tax return when you complete it next year.