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Outbuilding Depreciation

We bought a home and are using a detached shop/garage exclusively to store our business tools and supplies. This is NOT inventory. It's about 560 sq. ft. The building was built in 1970. I have no idea if it was ever used officially in a business before. I assume not.

I also use 50 sq ft. inside the house for a small office.

 

Questions

1. Can this be deducted?

2. If so, must it be depreciated? Or can it be depreciated given its age?

3.  If I cannot depreciate, can I only deduct expenses for share of utilities and improvements?

4. Would it possibly be easier just to claim 300sq. ft. and use the simple method?

5. How would I calculate basis for this building?

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1 Reply
Cynthiad66
Expert Alumni

Outbuilding Depreciation

If you are using this building for business, you can depreciate it.  When you purchased the property, was it included in the sales price?  Figure out what part of the purchase price was for the building. That will be your basis plus add any improvements to the building since purchase.  You will be able to deduct all expenses incurred for daily use of the building but any capital improvements must be depreciated.

 

A repair or routine maintenance to a capital asset, such as an office building or equipment, may be a business expense that is fully deductible in the year that you incur the costs. In contrast, an improvement to that asset is considered a capital expenditure.

 

Figure out which would be best for you, the Simplified method with 300 sq ft or trying to determine the depreciable basis for the building.

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