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Level 2
February 24, 2022
Question

Deducting detached workshop

  • February 24, 2022
  • 5 replies
  • 22 views

Spent last year building a detached workshop on my property exclusively for my new home based business. I got a loan for the base structure which I make monthly payments on and paid out of pocket for all the other building materials (Home Depot and Lowes) which were needed to complete the shop. I'm trying to figure out exactly how and where I should be inputting these costs. I had significant expenditures last year to complete the shop which wasn't done until November and therefore the new business had very, very little income. Any help is greatly appreciated. 

    5 replies

    AliciaP1
    Level 13
    February 24, 2022

    You will enter this as an asset for your business.  To do this in TurboTax Online please follow these steps:

    1. Within your tax return use the magnifying glass icon to search for Schedule C
    2. Click the Jump to link
    3. Click Edit for the line of work
    4. Scroll down and click Add expenses for this work
    5. Scroll to and click Add for Assets - if you don't see it on the list, scroll down to the Less Common section and click the down arrow and show more until you do
    6. Click Continue
    7. Click Start for Assets
    8. You will treat the whole cost of building the workshop as the asset so answer No to Did you buy any items for any business, rental property and/or farm that cost $2,500 or less in 2021?
    9. You will also choose No to Did you make improvements to a building you used for this business in 2021?
    10. Choose Real Estate Property to Describe the Asset
    11. The date purchased will be the date you started using the workshop for your business and then click Continue
    12. Choose Nonresidential real estate and Continue
    13. Name your asset - Workshop works!- and enter the total cost of buying the base structure and all the purchases to complete the building
    14. Leave the land cost blank since this is still your personal property
    15. Choose I purchased this asset new and Yes, I've always used this asset 100% for business 
    16. Enter the date your business started (which is the date of purchase) and click Continue

    TurboTax calculates the depreciation and enters it on your Schedule C for you.

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    DarrenHAuthor
    Level 2
    February 27, 2022

    Awesome! Thank you so much. One last question. Do I include finance charges in the total cost of the base structure since I financed it over 5 years? 

    Level 15
    February 28, 2022

    The finance charges would be deducted as an annual expense for the business Schedule C as interest.

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