Yes, the "out building" qualifies for use as a Home Office. According to the IRS "The term "home" for purposes of this deduction:
- Includes a house, apartment, condominium, mobile home, boat or similar property.
- Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
- Doesn't include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business.
Expenses that relate to a separate structure not attached to the home may qualify for a home office deduction. They will qualify only if the structure is used exclusively and regularly for business. Unless the costs to finish the space were repairs, then would be an improvement to the property. You would add those costs as a separate asset. You would depreciate those costs, similar to the way you depreciated the room in your house; however, since the improvements apply only to the home office space (as opposed to a new roof on the main house) you will depreciate 100% of that asset. You will also depreciate the out building in the same way you did the room in your house, as a percentage of the entire house. Any expenses you can identify with the home office building are 100% deductible.
For more information see: IRS Publication 587 (2024), Business Use of Your Home
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