topic How do I allocate improvement expenses for a separate structure? in Self employed

How do I allocate improvement expenses for a separate structure?

KatKan — Mon, 09 Mar 2026 10:03:07 GMT

We purchased the house beside ours (4 feet away) in October 2021 to be used for business. It needs a lot of improvements (electric, plumbing, cleaning, painting) before we can move the business out of our home. So I still need to claim home office as 100% for 2021.

How do I set up the "separate structure" to expense the improvements made in 2021? 100% of these expenses are for the business, not part of our home. So are the utilities for that building.

Re: How do I allocate improvement expenses for a separate structure?

ColeenD3 — Mon, 18 Apr 2022 11:54:06 GMT

All improvements are added to the basis of the building and the business portion of that entire cost is depreciated, the same way you are doing your home office now.

Re: How do I allocate improvement expenses for a separate structure?

KatKan — Mon, 18 Apr 2022 14:07:44 GMT

How do I add the separate structure? As another home office? Since I am not currently in it, do I still use 100% for that structure? Can I use both structures at 100%?

Re: How do I allocate improvement expenses for a separate structure?

KatKan — Mon, 18 Apr 2022 14:55:39 GMT

I think I have found the answer myself.

https://ttlc.intuit.com/community/taxes/discussion/where-do-i-enter-the-purchase-of-a-building-for-business/00/475435

If I understand this correctly, I need to wait to enter it until we move the business to the second house.

So, I will track all the improvement expenses and add them to the cost basis, on next year's tax return.

Please, let me know if this is not correct.

Thank you for the assistance.

Re: How do I allocate improvement expenses for a separate structure?

DianeW777 — Mon, 18 Apr 2022 15:08:29 GMT

Yes, you are correct. Since the new building has not officially been 'placed in service' you gather all the expenses for remodel, original purchase, purchase expenses until that day. Once the building is placed in service you begin the depreciation expense on your tax return for your business.