Sch C business expenses vs office expenses

[sam992116]

What constitute Home office expenses (require you file from 8829 attach to Sch C)  vs expenses listed on Sch C.

Some confusing items are

Office expenses, Repair and Maintenance, Utilities, Wifi bill are listed on Sch C as Business expense. So What are Business use of your home expenses which require form 8829?

These are TT  office expenses for Main Sch C .

Office expenses are any additional expenses you incurred this tax year that were related only to your office space.

Examples include:
- Business membership fees to superstores like Costco and Sam's club
- Pickup and delivery services
- Bottled water delivery
- Shredding services
- Backup data and archiving services

More examples:
- Office cleaning
- Handicap access expenses
- Office decorating expenses
- Separate cable line for your office
- Separate security system for your office

[tagteam]

See https://www.irs.gov/instructions/i8829

If you are not using the simplified method for your home office.

[sam992116]

When you deduct actual home office deduction (form 8829) you get to depreciate home office as well.

Q: Home office depreciation is "optional" or you have to depreciate it, if you want to use home office deduction?

Could someone please help me with math?

Lets say (made up numbers) I bought my home 10 years ago

Purchase price (improvement and closing cost) - $100 K (at that time land value was $20K and structure $80K)

Started business on Jan 1st  2022 and at that time Fair value was $300K (land  $60K and structure $240K)

For depreciation, software is asking for lesser of either purchase or start of business fair value

so I am looking at $80K (100k - 20 K (land)- starting point.

I did calculations via turbotax and home office is only allowing like $500 to carry forward (I can't deduct this year as I don't have income on Sch C).

Q: Let say If I sell this property in 2 years for $350 K. Under normal circumstances I will owe no tax as $250K capital gain is tax free due to personal residence 2 out of 5 year rule.

Now due to this home office deduction, I will owe some taxes on that gain. My home office is 15% home size.

Gain from number sale price - purchase price  = 350-100 = 250 * 0.15 (office size) = $37.5K

or Sale price -fair market value at start of business = 350-300 = 50 * 0.15= $7.5K

Part I don't understand is which gain will be taxable and what rate? you tax bracket or some standard tax rates for real estate capital gain. What will happen to 2 out of 5 years rule. If you could give some example?

[sam992116]

Any one?