there are two methods for home office deduction. The simplified method (SM) allows a $5 sg foot/year deduction for up to 300 sg ft. Thus max $1500
or the actual expense method which would require you to continue to take depreciation. you can switch between methods each year but any disallowed expenses can't not me used in the year the SM method is used. unused expenses carry forward.
there are ordering and limitation rules for actual expenses. the business portion of mortgage interest and property taxes are limited to the schedule C income on line 29. if there is still net income after deducting those expenses, other expenses are allowed up to the remaining net income. any unused expenses carryover to offset future income. you must keep track of all depreciation taken because it is recaptured when the property is sold.
