Since this is a separate structure, and not attached to the house, all of the expenses are direct expenses and they all can be deducted either through adjustment to Basis, or direct expense. You must then allocate the space between the home and the office.
IRS Publication 527 states:
Additions or improvements.
"Add to the basis of your property the amount an addition or improvement actually costs you, including any amount you borrowed to make the addition or improvement. This includes all direct costs, such as material and labor, but doesn’t include your own labor. It also includes all expenses related to the addition or improvement."
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