Is $50k to convert a bedroom into a home office (recessed wall to storage closet, doorway, recessed lights) an asset or expense? Does not logically increase home value.

[govnar]

I paid a contractor $50k to convert a bedroom in my home into my home office. Scope included converting a recess in the wall into a closet, a new door to the backyard for clients, recessed lights, etc. Should I record this cost as an asset or expense? It's more like repairs/maintenence than it is a building improvement (at least per my city's property tax guidelines). Wouldn't it be odd to record this as a business asset but not an improvement to the book value of my home asset in city records, being the same property?

[govnar]

I see an expense category "repairs and maintenance" but turbotax says "this only applies to separate office or other business property" (ie not home office?)

[RobertB4444]

You had it right the first time.  It's going to be an asset.  A $50K asset called "Home Office Renovation".  No, it didn't add value to your property but it did cost you all that money and this is how you deduct it.  

@govnarayan 

[govnar]

Thanks @RobertB4444! Do you know how to add a 'home office improvement' asset to turbotax? There are 4 choices to descrive the asset - computer/video/photo/telephone equipment, tools/machinery/equipment/furniture, real estate property, and intangibles/other property. The 'real estate property' option seems to apply only to commercial buildings (vs my home office, which is a room in my home). The 'other property' options asks me to input an asset class for depreciation but I can't see see residential home improvements in the examples. Have a similar question for assets that affect the whole house eg new roof (of which a % I think can be attributed to the business).      

[ThomasM125]

Real estate property is the correct choice. Your home office is considered a commercial property since you use it for business purposes. The same applies to the roof. The roof may not last you 39 years, but you can deduct the undepreciated balance of the cost when you replace it again.

[govnar]

Thanks @ThomasM125! Just to confirm - replacements affecting my entire home (eg 16% home office sqft applied to the cost of a new roof) also fall under 'commercial property'?  

[ThomasM125]

Yes, the portion that applies to your office is considered commercial property.