Yes,
per IRS Topic 508 - Business Use of Home "A separate
structure that's not attached to your home used exclusively and regularly in
connection with your trade or business" qualifies as one of criteria to deduct expenses for business use of the home.
You would record the shed as
an asset in TurboTax so it could be depreciated and you could also deduct expenses
related to the shed (such as heat, electric taxes, etc.), and expenses related to
your woodworking business.
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