Home remodeling expenses when home contains a office

Forum|Forum|3 years ago
April 12, 2023
1 reply
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I have an engineering consulting business (LLC) that I run out of my home. My office space is 7% of the house. This year we started a major project remodeling of the entire house. Even using just 7% of the remodel cost wipes out my entire business income for the year. This seems wrong. Is it legitimate to do this? Is there any downside?

Mike9241

Level 15

yes it wrong because a major remodeling needs to be capitalized and then depreciated over 39 years.

Mike9241

MiketheVikeAuthor

Level 2

Where would you capture the remodeling costs on a tax form?

What is the criteria or dollar limit for entering a cost on form 8829 Line 20?

PatriciaV

Level 15

The remodeling costs would be reported as an asset for your Home Office. The depreciation expense from this asset would be reported on Form 8829.

There is no limit to the expenses you may report for your Home Office. However, the home office deduction is limited to your income. A net loss for the business may not be created by claiming this deduction, so there is no incentive to maximize a home office deduction if you don't have the business income to match.

For more info, see IRS Pub 587 Business use of Your Home - Deduction Limit.

@MiketheVike

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