I would like to take the itemized deduction for my home office, as it saves me more money than the standard deduction. However, I do not want to depreciate my home office because I am planning to have less income in future years (i.e. when I sell the house) and would rather pay that income tax later. Is it possible to do this?
Yes, if you choose the simplified option for the method you want to use to claim the home office deduction. For taxable years in which the simplified option is used, the depreciation deduction allowable for the portion of the home used in a qualified business use is deemed to be zero. Accordingly, you do not have to recapture any depreciation for taxable years in which you used the simplified option. However, you may have to recapture depreciation for taxable years in which you used the regular/standard/actual expenses method. If you use the simplified option for one taxable year and use the regular/standard/actual expenses method for any subsequent year, you must calculate the depreciation deduction for the subsequent year using the appropriate optional depreciation table, even if you did not use the tables for the first year the property was used in business.
Per the following link, IRS FAQs Depreciation & Recapture:
Simplified Option - There's a simpler option, as announced in Revenue Procedure 2013-13, where qualifying taxpayers may use a prescribed rate ($5 per square foot limited to 300 square feet) to compute their business use of home deduction. This option used in lieu of determining actual expenses has the advantage of reducing taxpayers' recordkeeping burden. Under this option, depreciation is treated as zero and won't reduce the basis of your home. For more information, visit Home Office Deduction, Simplified Option for Home Office Deduction, and FAQs – Simplified Method for Home Office Deduction. In addition, under this optional method, taxpayers can still deduct business expenses unrelated to qualified business use of the home for that taxable year, such as advertising, wages, and supplies.
On a related note, it appears you are using TurboTax Self-Employed so please ensure you entered the home office deduction in the appropriate section, e.g. employee job-related expenses section vs. self-employed business expenses section. If you entered the home office deduction in an incorrect section, you cannot transfer it, you have to delete and re-enter in the appropriate section.
If you entered the home office deduction in the employee job-related expenses section, please note that the home office deduction for employees is subject to the 2% rule and is included as an itemized deduction on Schedule A. Furthermore, TurboTax automatically selects the federal deduction – standard or itemized – that works best in your favor. As you may already know, itemized deductions are subject to various thresholds and/or limitations so that may explain why your tax refund(s)/owed have not changed. Moreover, your total itemized deductions may not be greater than the standard deduction.
If you entered the home office deduction in the self-employed business expenses section, please note you cannot deduct more than the net profit your business makes each year. (But like other operating losses, you can carry these forward into future tax years.)
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- Where do I enter the employee home office deduction?
- Where do I enter the home office deduction for my business?
- Setting Up a Home Office
- Working at Home
- The Home Office Deduction
- What is IRS Form 8829 - Expenses for Business Use of Your Home
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- How can I tell which deduction (standard or itemized) I'm using?
- How does the itemized deduction differ from the standard deduction?
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- What is Schedule A?
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