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KatKan
Returning Member

How do I allocate improvement expenses for a separate structure?

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.

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4 Replies
ColeenD3
Expert Alumni

How do I allocate improvement expenses for a separate structure?

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.

KatKan
Returning Member

How do I allocate improvement expenses for a separate structure?

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%?

KatKan
Returning Member

How do I allocate improvement expenses for a separate structure?

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-b...

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.

DianeW777
Employee Tax Expert

How do I allocate improvement expenses for a separate structure?

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.

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