My wife and I both use areas of the home for our respective businesses. Because she is an artist, she uses the entire lower level of the home (1501 sq.ft.) as her studio, leaving ~3500 sq.ft. of living area. I see that I can depreciate this area of the home and net a considerable refund on my return. However, I'm reading that of we sell the home, we'll have to pay the capital gains because we depreciated the home (presumably, this depreciation would be an ongoing thing, as long as she continues to create).
We don't ever intend to sell the home, and in all likelihood, the adult kids will inherit the property. IF they decide to sell, will they be liable for any capital gains taxes, or are they free and clear (the estate won't surpass the $11 million limit)?
@SlickMic said: "she uses the entire lower level of the home (1501 sq.ft.) as her studio" ..... "I see that I can depreciate this area (3500 sq.ft. of living area) of the home and net a considerable refund on my return".
To claim a home office (business use of home), the space must be used "Regularly and Exclusively" for business. It's not possible to use your whole residence Exclusively for business.