Home office deduction removed but have question

[Verojay]

Hello! 

I’ve searched for hours, but I can’t find the exact answer. I filed an extension and included the home office deduction and a small amount of income, as a placeholder. I thought my husband was getting a 1099 for a side business, he ran for eight years. However, he said he’s not continuing the business, nor claiming the HO deduction for 2023. I have a chronically sick child and honestly hadn’t realized he hadn’t worked the side business, last year. He works a full time job, as well. He didn’t make much money working the side business, either way.

Here are my questions:

1.) I basically didn’t include income for him in 2023 on TT and obviously I didn’t claim the home office. However, do I need to remove the Home office asset, to stop depreciation of it or is it automatically stopped if I’m not claiming it? I’m confused on if it continues depreciating, unless it’s formally removed. I saw another comment on the community discussions, which said you have to formally remove it as an asset. But I think that was meant for someone who stopped using it part way through the year. 

2.) Can I find a depreciation worksheet on TT that includes previous years or do I just pull form 8829 for my records  (in case we sell in the future)?

3.) I’m ready to file tomorrow, however I was using Home and Office, because I thought we would do business write offs. I’m assuming I can still use the program, without the business? I’m willing to pay the higher fee, instead of starting over on Deluxe. 

I hope this makes sense. Or maybe I’m just confused lol…..and tired. Either way, thank you! 

[DoninGA]

Since the business is closed and not being reported on your tax return, the depreciation of any assets is stopped.  You do not need to dispose of a Home Office as an asset.

You will need to recapture the depreciation taken on the portion of your home that was used as a Home Office when the home is sold.  So you will need the Form 8829 for all prior years where you used the Home Office for the business and took a depreciation expense for the office.

Not sure, but on the Depreciation and Amortization Report the depreciation might be shown for the home office.  This report will be available for the last tax year you reported the business on your return.  So if you used the TurboTax desktop editions for tax year 2022 and had business income and expenses, the report will be available in Forms mode for 2022.

You can use the TurboTax Home & Business edition even if you are not reporting any business income and expenses on your tax return.

[Verojay]

Thank you so much! I forgot to add two questions:

1.) Some of my tax returns, prior to seven  years ago, were destroyed, by water. Do you know if I can request paper copies from Turbo Tax or do I just go through the IRS? 
2.) IF we ever want to claim the home office later down the line, I’m assuming we can but  does depreciation pick up where it left off or from the point we start using it again?

Thanks again and have a great day! 

[DoninGA]

1) If you used the TurboTax desktop editions then the only copy of your tax returns will be on the computer that was used for the return.  TurboTax does not store online any tax returns created using the desktop editions.

Go to this IRS website for free federal tax return transcripts - https://www.irs.gov/individuals/get-transcript

For a fee of $30 you can get a complete federal tax return from the IRS by completing Form 4506 - http://www.irs.gov/pub/irs-pdf/f4506.pdf

The IRS normally would only keep tax returns for the past seven years.

2) If you start the business again then the depreciation used for the Home Office expense would continue where you left off when the business was closed.

[Verojay]

Hello! I really appreciate your help. Sadly, when I get info, lol I have a few extra questions. If you’re too busy, no worries. 

My husband is deciding if he will pick up more side work through end of year (it’s IT work). However, for last year as you saw, he had zero income from it.

Is it better to delete the home office asset for 2023 or leave it (and file) until he decides? Currently, I put in zero for income, but the home office asset is still there. I did see there should be no depreciation, if there wasn’t income included.  I see a Schedule C is generated, if I put in zero. I wasn’t sure for 2023, if it’s better to leave this as is, or delete schedule C, home office as an asset, etc.  If he doesn’t pick up extra income by end of year, I will definitely remove home office as an asset and delete the business for 2024. Again, thank you for generously giving your time. 

[DoninGA]

In my opinion it would be best to remove the Schedule C and the Form 8829 from the 2023 tax return.  Then if there is self-employment income and expenses for 2024 you can continue with the Schedule C and the home office deduction on the 2024 return.  Again, this is only my opinion.

However, not removing the Schedule C and the Form 8829 on the 2023 return will not have any affect on your tax return since you will not have any income or expenses from self-employment to affect your total taxable income or total tax liabilities on the tax return.