Basement Finish Write-Off for independent contractor working from home

[geed]

After reviewing the return: Turbotax reported these errors that need to be fixed:

1) Asset Entry Worksheet (Finished basement): Section 179 should be blank. A section 179 deduction is not allowed on real property.

This is question #7: Enter the amount of Sec 179 expense elected:

I see the total cost of the home office in basement here (~$6K)

2) Elect OUT of SDA should be blank. The asset is not Qualified Property for the Special Depreciation Allowance.

This is question #9.h.

I see Yes checked on this form. 

3) Eligible Sec 179 property should not be checked YES. Only tangible personal property is eligible for the Section 179 deduction

This is question #42

I see Yes checked on this form. 

4) Asset class is incorrect. The calculated value for Asset Class is the only valid choice based on Type of Asset selected. Override or delete entry in Asset Class to restore calculated value. 

This is question #46

I see 25 years selected on this form (Don't know why or how TT selected 25).

[geed]

"Nonresidential real estate" was selected for "How would you categorize this asset?" question by mistake.

After I switched my answer back to "Qualified improvement property", all the errors are gone except for the last one:

Asset class is incorrect. The calculated value for Asset Class is the only valid choice based on Type of Asset selected. Override or delete entry in Asset Class to restore calculated value. 

This is question #46

I see 25 years selected on this form (Don't know why or how TT selected 25).

What should I do to fix this?

[geed]

I deleted the asset entry and re-entered all the information. Now errors are gone and I see following values on the form:

#45: Depreciation Type:                 MACRS

#46: Asset Type:                               15  --> Now it is 15 for some reason and TT seems to be happy. Is this the correct value?
#47: Depreciation method:            SL

#48: MACRS convention:                HY

#50: Recovery period:                     15.0

#51: Year of depreciation:               1

#52: Depreciable basis:                   0

#55: AMT Depreciation method:  SL

#56: AMT recovery period:            15.0
#57: AMT Depreciable basis:         0

For Virginia State:
State Depreciation:
#63

g. State asset class:                          NR

h. State depreciation method:      SL

i. State MACRS convention:          MM

j. State recovery period:                39   --> For state it is 39 (not 15). Again not sure if this is correct?
k. State depreciation basis:          0
m. State depreciation deduction: 0

[geed]

Please let me know if this looks good.

Also just to double check

I have added finished basement in 2 sections:

1) Business Assets/Assets being depreciated: Here I have one-time deduction for the cost (1/6 of the total cost).

I selected "I'll deduct the full value of the item this year"

2) Business Expenses/Home Office Expense

In Home Office Asset Summary I added finished basement as an asset for depreciation to kick in in addition my home. I have 2 assets listed here now. 1) My home 2) Finished basement. And I see a calculated depreciation value for both. 

* Even though I indicated I want full value of the item this year in Business Assets section, does it make sense for TT to show a depreciation value (and thereby a deduction)?

[PatriciaV]

If you elect to expense the cost this year, you would not also add that cost as an asset for depreciation. Instead, enter this expense under Other Miscellaneous Expenses for your Home Office Deduction. And delete the asset you added (use the trash can icon).

[geed]

Okay so I removed finished basement from both business asset section and home office asset section (where depreciation occurred). I guess we are back to what TT tax advisor I talked over the phone (and did screenshare) told me a few weeks ago. He told me to put this cost down in Home Office repair expense section (as Home Office only repairs). There is no Other Miscellaneous Expenses in Home Office Deduction in TT. So I guess now I am good to go?

[PattiF]

Yes, this has been entered in the correct way. Your home office entry should be good to go.

@geed