Form 8829 Line 42 depreciation is wrong when home office percentage changes year-over-year

[user17760428125]

Form 8829 Line 42 depreciation is wrong when your home office percentage changes year-over-year.
This is a software bug.

I changed my home office from 10% to 5% this year. TurboTax is understating my depreciation deduction by ~$242, and I can show exactly why.

This is not an input error. I can reproduce it by changing only the business-use percentage while keeping everything else the same. The deduction should scale proportionally with the percentage — it's a straight multiply on the form — but it doesn't. Below ~3%, depreciation drops to $0 entirely. That's wrong: you don't lose your deduction because your office is small.

I've seen other threads in this forum with the same symptom on 8829 that were closed without resolution. I've done the math to isolate the bug and I can reproduce it to within rounding precision. Details below — this needs to get to the engineering team.

The symptom

Per the form instructions, Line 42 = Line 40 × Line 41. TurboTax is not computing that product. Holding all home information constant and varying only business-use percentage:

- 1.66% → $0

- 3.33% → $173

- 5.00% → $527

- 6.66% → $882

- 10.00% → $1,590

These should be proportional to the percentage. Instead they follow a line with an offset — consistent with a hidden subtraction being applied before the depreciation calculation.

The root cause

My home was purchased March 2014, 39-year SL/mid-month. I used 10% business use for prior years and reduced to 5% this year.

TurboTax appears to be:

1. Taking cumulative depreciation already claimed at the old 10% basis (~$14,634 over ~9.8 years)

2. Computing the new office basis at 5% ($29,997)

3. Subtracting the old cumulative depreciation from the new, smaller basis ($29,997 − $14,634 = $15,363)

4. Spreading the remainder over remaining useful life ($15,363 ÷ 29.17 years ≈ $527)

It also explains the offset pattern and why small percentages zero out.

Why that's wrong

The asset being depreciated is the entire home ($599,934), not the office portion.

Each year, 1/39th of the home's basis depreciates, and the office-use percentage determines what fraction of that is deductible.

After ~10 years, 10/39 of the home's basis has been consumed — leaving 29/39, or ~$446,101. At 5% business use, that's $22,305 of depreciable basis remaining over 29 years — $769/year. That's exactly what the straight Line 40 × Line 41 multiply produces.

TurboTax is instead treating the office portion as the asset — subtracting $14,634 of prior depreciation (taken at 10%) directly from the new 5% basis of $29,997. That conflates the deductible portion with the underlying asset and double-counts the reduction when the percentage shrinks.

Impact

~$242 understatement at my percentages. The error scales with the gap between old and new business-use percentage, and completely zeroes out the deduction at small percentages. This is affecting anyone who changed their home office size between tax years.

Note that this same logic would overstate depreciation for someone starting a home office late in the asset's life.  In the last year of a 39 year depreciation period, a 10% office would depreciate a full 10% of the house basis in a single year.   I haven't verified this impact, but other threads have mentioned strange numbers that could very well be this.

[user17760428125]

Can I get someone to weigh in on this? Am I missing some nuance of depreciation that makes what TurboTax is doing correct? I think it might be treating the depreciation in some way relevant to selling a house, but this approach doesn't make sense to me in this context.

I created a new TurboTax account did some targeted tests changing office-use percent and in-service dates. 

Given a home with a total basis of $390k, a whole-year of 10% office use using the straight-line method over 39 years should give us depreciation of $1,000 a year.  A 5% office would be $500 a year.  Move the in-service date to December 31st to limit the effect of the Mid-Month accounting rules.  Home size is entered as 1000 sq ft, and no other expenses are listed for the house.   Home-office in-service date can be any prior year, and it doesn't seem to matter as long as it's after the house in-service date.

Here are the different scenarios for reporting 2025 office use percent.

	House Acquired	House Placed In Service For Business Use	Prior Use %	Prior Depreciation Of House	2025 Use %	Depreciation Allowed
1	12/31/24	12/31/24	0%	$0	10%	$1,001
2	12/31/04	12/31/24	0%	$0	10%	$1,001
3	12/31/24	12/31/24	0%	$0	10%	$1,001
4	12/31/14	12/31/14	0%	$0	10%	$1,347
5	12/31/04	12/31/04	0%	$0	10%	$2,057
6	12/31/94	12/31/94	0%	$0	10%	$4,353
7	12/31/84	12/31/84	0%	$0	10%	$0*
8	12/31/04	12/31/04	10%	$20,042	15%	$2,029
9	12/31/04	12/31/04	10%	$20,042	10%	$1,000
10	12/31/04	12/31/04	10%	$20,042	9%	$794
11	12/31/04	12/31/04	10%	$20,042	8%	$589
12	12/31/04	12/31/04	10%	$20,042	7%	$383
13	12/31/04	12/31/04	10%	$20,042	6%	$177
14	12/31/04	12/31/04	10%	$20,042	0%-5%	$0

* fully depreciated

For the dates involved, $20,042 is the historical depreciation TurboTax itself suggests for the 2004-2024 time period.  You can see that TurboTax gives us what we expect if we keep the office use percent steady the entire time after the house is placed in service for business use, but the depreciation allowed swings wildly if that use percent changes.

For the specific scenario affecting me, note that after 20 years at 10% usage, a drop to 5% usage disallows all additional depreciation.

For the alternate case - which is far worse - look specifically at rows 3-6: the same house with no depreciation ever taken, placed in service at varying points in the past, produces wildly different deductions depending on how close we are to the end of the 39-year life.

• At ~20 years in, TurboTax allows roughly 2x the straight-line amount: $2,057 at 10% use instead of the $1,000 the form's own formula would produce. 
• At ~30 years it has roughly doubled again to $4,353. 
• And then it doubles again in ~4.5 more years. 
• And again in ~2 years after that. 

In the final year of the 39-year life, it approaches $39,000 - the entire 10% share of the home's basis, consumed in a single year. I can't get TurboTax to emit these final numbers directly because nonresidential real property placed in service before May 13, 1993 used a 31.5-year schedule rather than 39.

I'm aware that depreciation "allowed or allowable" gets recaptured when you sell, but that seems like a disposition issue -- it shouldn't govern current-year deductions.

[AmeliesUncle]

That is the result of using the mathematical method (not using the "tables") for depreciation, using the order of operations that TurboTax uses.  TurboTax does that for all assets.

The order of operations is questionable, but as far as I can tell, there is no IRS guidance on that matter.  And besides TurboTax, there are several other software companies that use the same method and order of operations. 

If you have the desktop/downloaded version, you can go into the "Forms" and access the "Asset Entry Wks".  If you scroll WAY down to the bottom, it is an option to use the "tables" for depreciation, which would give you the results that you are expecting.

[DawnC]

If you are using the desktop software, go to Forms Mode and find the Asset Entry Wks (worksheet).   Scroll down to line 43 and select YES to use the IRS tables for MACRS property.     If you are using TurboTax Online but want to switch, see How do I switch from TurboTax Online to TurboTax Desktop?