Deduction for home business

[tw63]

I'm a newbie who needs your expert advice. I purchased a standalone 12x16 building in 2019 to run my small business out of, it sits in my yard. I made several improvements - added electrical, paneling shelving etc. I did not officially start working until Jan of 2020. Can I deduct any of these cost this year?

1) cost of the shed , approx $8200 and

2) the improvements I made , approx $1200, to get it ready for business 

Thanks

[JohnW222]

Yes, these would be valid deductions for your small business. 

If you're self-employed and filing a Schedule C, the cost of the shed and improvements could be included as deductions. 

It might may be an asset that needs to be depreciated.  For more information on that, see Line 13, Depreciation and section 179 expense deduction in the Instructions for Schedule C.

[tw63]

Thanks for the  quick reply. When I go through the deduction process in turbotax , it only allows 5000 max for the expense, so it does look like I need to depreciate, I do not find a type for a "shed" , what type of assett, what type of depreciation and for how long?

Either way when I add theses costs in as deductions, I've been experimenting, Turbo tax puts my return at very close to  high risk for audit, thoughts?

[JamesG1 · Accepted solution]

At the screen Tell us a little more about the asset,

• If the item is reported as Office furniture, fixtures and appliances, the shed will be depreciated over seven years.
• If the item is reported as General purpose tools, machinery or equipment, the shed will be depreciated over seven years.
• If the item is reported as Construction machinery and tools, the shed will be depreciated over five years.

At the screen How do you want to deduct this item?, you may want to experiment with the various options to accelerate the depreciation and how they affect ‘risk of audit’.

[tw63]

Thanks for the expert advice!