PA Home Office Expense - Heating System Replacement

[JoeMotz]

My spouse meets all the requirements for a home office deduction in PA. We replaced our heating system this past year. We paid for the repair with credit that will be paid back over the next 3 years.

First, am I correct that we can claim a home office expense deduction for this repair? Second, where do I list it? Depreciated expense? Property Maintenance? And do I list the amount that we paid in 2024, or the total amount that the repair actually cost?

Finally, is this something that I report over several years or just once?

[Vanessa A]

Yes, if you have a home office you can take a deduction for a percentage of the repair that is based on the percentage that your home office makes up of your house.  Meaning, if your home office is 200 sq. ft. and your home is 2,000 sq. ft. you can allocate 10% of the cost of the heating system replacement to your home office.

The replacement of a heating system would be a depreciable expense and listed as an asset.  This will be reported over several years. To get there you will select the following:

1. Business income and expenses
2. I'll choose what I work on
3. Start or update next to Business income and Expenses
4. Edit next to your business profile
5. Start next to Business Assets

When calculating the value, you will use the full amount that you paid.  When you pay with credit, it is considered the same as having paid in full when it comes to taxes.  You take the deduction when you take on the liability for payment. 

Also, be aware, that if you are taking a Home Energy Credit for this HVAC replacement, if you use the home for more than 20% business, then you will not be eligible for the full credit.  It will be prorated.