Home Office Move

[DRye]

I have been using a room in my home as an office for the last four years (the time I have lived in my home).  It is a dedicated office and I take a percentage of my utility bills and maintenance as a deduction.

I am moving my office to an out building (about 50 feet from my home) that was built before our home.  The space that I will be using was finished four years ago but I have recently installed a mini split and a few other upgrades so I can use it as my office.

Here are my questions:

1. For 2025, can I claim what it cost to finish the space four years ago?

2. Am I correct that I can claim the 2025 upgrades (mini split, etc)?

3.  Would this separate space be considered a home office or something else?

4.  If something else, what are the differences in a home office and this space?  Where could I find that information?

[DavidD66]

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