home office deduction

[DONNA 03079]

I'm bit confused as to what figure to use as "cost of entire home."  I purchased house in 2010 but began home office in 2020. 

do i use the original loan amt or do i use the amt that property is currently assessed at?  thanks for your assistance.

donna

[DianeW777]

It depends!  First figure out what you actually paid for the entire home including capital improvements over the years, also any closing costs when you purchased the him (deed transfer, title search, etc).  Next, see what the fair market value is in 2020 when you began using it as a home office for business use. The lesser of these two amounts will be used as the cost basis for depreciation.

You can use your property tax assessment to figure out how much should be building and how much should be land.  Add the two assessments together then divide each by the combined total to get the percentage for each.

Please update if you need further assistance.