Home Office

[Jeisenberger01]

Curious-

my wife has had a home based salon since 2012. We are now completing an addition specifically for her salon. Would the cost of building the salon be a deduction?

[Critter-3]

The addition must be depreciated ... it cannot be expensed.  I highly recommend you talk to a local tax pro to discuss this situation so you know what is allowed and what isn't ...  

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Publication 463 Travel, Gift, and Car Expenses

Https://www.irs.gov/pub/irs-pdf/p463.pdf  

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

[Opus 17]

In brief, depreciation means you deduct the cost over time, in this case, 39 years for business property that is not a rental residence.  You must also adjust your cost basis accordingly, and when you sell the home, you will have to repay (recapture) any depreciation you took or could have taken for business use of the property, even if you didn't take depreciation.  So make sure to take it.

(If you are using the $5 per square foot safe harbor, you don't have to worry about depreciation, but you also can't take anything extra for the addition.

Talking to a pro is a good idea for the first year, to make sure everything is set up correctly.