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Deductions & credits
I suspect the installer is incorrect. The instructions for the tax credit for home solar clearly say you must reduce your cost for claiming the credit by any utility company rebates, and you must reduce your cost basis of the home improvement (for capital gains purposes when you sell) by the total of any credits and rebates. I don't know why that would be different for businesses since the concept of basis is pretty much universal. (It also doesn't make sense that if you got no rebates, you could still only depreciate 85%.)
Even if you could, then (for a 20% office for example) you would be taking home office of 85% of 20% of the cost, instead of 100% of 20% of the net costs, and I don't think that will be much different. Also remember that must recapture the depreciation by paying tax on it when you sell the house, even if you otherwise qualify for the capital gains exclusion, so the more you depreciate now, the more you pay tax on later. And depreciation recapture is a flat 25%, when the overall tax rate for most taxpayers was just reduced to 22% or 24% (depending on income) and the capital gains rate is 15%. Make sure you keep all your home office deductions including depreciation calculations for as long as you own the home plus 7 years after.
Even if you could, then (for a 20% office for example) you would be taking home office of 85% of 20% of the cost, instead of 100% of 20% of the net costs, and I don't think that will be much different. Also remember that must recapture the depreciation by paying tax on it when you sell the house, even if you otherwise qualify for the capital gains exclusion, so the more you depreciate now, the more you pay tax on later. And depreciation recapture is a flat 25%, when the overall tax rate for most taxpayers was just reduced to 22% or 24% (depending on income) and the capital gains rate is 15%. Make sure you keep all your home office deductions including depreciation calculations for as long as you own the home plus 7 years after.
‎June 6, 2019
9:38 AM