Depreciating home office but wants to correctly remove it from deprec and take actual expenses instead.

[taxesohmy2017]

Hello,

I have a question, I run my business out of my house.  I am sole owner of this house. I have a dedicated room that my clients meet me all year.  No personal activity can be done this room, this is strictly an office.

I started taking portions of my office as a depreciation starting from 2015 to current.  The cost basis for this office space I figured out was $26,626 and have it set for 39.5 years to depreciate and so far I accumulated $4070 of depreciation. My deprec is approx $683 per year.

From my understanding since I am taking the depreciation, I can not deduction portions of my utilities, property tax, house insurance. First is that correct? If I misread the publication please let me know.

I am still actively working out of my house, however I wish to remove the home office depreciation now and take my portions of actual expenses (my utility bills, property taxes paid and house insurance) instead because those expenses come to approx. $2000 per year.

My question is, how do I properly remove my home office depreciation now and recapture the gain on the $4070 that accumulated so far?

And if I can do that now, where would go on Form 4797 Part I, Part II or Part III. If on Part III, would it go under Sect 1245 or Section 1250.

Thank you in advance for your assistance.

LF

[Mike9241]

there are two methods for home office deduction. The simplified method (SM) allows a $5 sg foot/year deduction for up to 300 sg ft. Thus max $1500

or the actual expense method which would require you to continue to take depreciation. you can switch between methods each year but any disallowed expenses can't not me used in the year the SM method is used. unused expenses carry forward. 

there are ordering and limitation rules for actual expenses. the business portion of mortgage interest and property taxes are limited to the schedule C income on line 29.  if there is still net income after deducting those expenses, other expenses are allowed up to the remaining net income. any unused expenses carryover to offset future income.   you must keep track of all depreciation taken because it is recaptured when the property is sold. 

[taxesohmy2017]

thank you