I have put up a new building. 1/3 is exclusive to business use only. Of the remaining 2/3 of building, 1/2 of that space is used for business storage. What are my options for deductions? Also, if I add items to building, how are they deducted.

[ColeenD3 · Accepted solution]

What is the balance of the building used for? Personal use?

I'm terrible at math, but the third of the building plus the 1/2 of the 2/3 is all business use. Determine business percentage by square footage.

If you have improvements that cover the entire building, you will use the same percentage to depreciate the business portion.

[gletvin]

Thanks, Coleen, that helps!  Yes balance of building is for personal use, lawn equip, truck, etc..  One example of improvement might be security cameras, and I'll use my calculator for the math, lol!  Do I depreciate the building and then expense the improvements and additions later?  My guess is I can't expense the building but need to set up on depreciation sch

[JamesG1]

The building will be depreciated and the portion allocated to land will not be depreciated.

I think that you mean improvements to the building such as construction of rooms and subdividing the area within the building.  If so, those improvements are also capitalized and depreciated from the date that the improvement begins to be used for business purposes. 

For instance, if you construct three office spaces within the building from January through March of 2022, then the space becomes available for business use on April 1, 2022.

[gletvin]

When do I depreciate and when do I just expense.  Again, for example, if a security camera system is added, is that depreciated or expensed.  Or, if I build an interior wall and add insulation.  Depreciate or expense?

[AnnetteB6 · Accepted solution]

If you are adding a component of the building itself, then it is depreciated.  The interior wall project would be depreciated.  

The security camera system could go either way.  If it is something extensive that is wired in to be a part of the building that you expect to remain in place for a number of years, then depreciation would be appropriate.  If it is more of a standalone, portable, easily removed or replaced type of system that you expect to upgrade to a newer version within a few years, then expense it.

@gletvin

[gletvin]

Thanks, Annette!  Information is good and helpful!