topic New fence in Deductions & credits

New fence

majdnass — Wed, 30 Dec 2020 21:16:43 GMT

In 2018, I installed fence in my backyard and I couldn't claim it in my taxes because (as I understand) I wasn't using my home as an office space back then. However, this year, I have been working from home almost for 8-9 months. Can I claim this now?

Re: New fence

DoninGA — Wed, 30 Dec 2020 21:18:38 GMT

If you are an employee who receives a W-2 from your employer, you cannot deduct any employee business expenses, including a home office, on a federal tax return due to the tax code changes in effect for tax years 2018 thru 2025.

Re: New fence

NCperson — Wed, 30 Dec 2020 21:54:44 GMT

and if you are not a W-2 employee, it has to be solely used for business. How can you justify that?

Re: New fence

xmasbaby0 — Wed, 30 Dec 2020 22:44:01 GMT

What in the world does a fence have to do with your home office?

Re: New fence

Opus 17 — Thu, 31 Dec 2020 03:46:07 GMT

Any permanent improvement attached to your land, including a fence, is added to the cost basis of the property and may reduce your taxable capital gains when you sell.

If you are allowed to take a deduction for business use of the home (currently, only allowed for self-employed), one of the expenses you can deduct is depreciation, or wear and tear on the property. This is based on the percentage of business use, and is taken over 39 years. The basis for depreciation is either the adjusted cost basis, or the current fair market value of the property, which ever is lower.

For example, suppose you purchased the home for $200,000, and it is currently worth $300,000, and you use 10% of the home in business. You could depreciate $20,000 of the home’s value over 39 years, which gives you a deduction as a business expense of about $512. (This is in addition to deducting 10% of your insurance, 10% of your utilities, and so on.). If you had spent $10,000 to install a fence, then the adjusted cost basis of the property is $210,000, and you would depreciate $21,000 over 39 years, creating a deduction of $564 per year.

However, understand that when you sell the property, you have to pay tax on the previous depreciation that you are recovering by selling the property at a profit, and you must pay this tax which is called recapture of depreciation, even if the rest of the sale is exempt from capital gains tax because of the homeowners exclusion.

And as noted, this deduction is not available for W-2 employees at the present time.