I have a dumb question… If you take these sort of home office deductions, how are things affected when you end up selling your home. (Just a general discussion, to get an idea)…[/quote]
Not a dumb question at all. In fact a very good one.
Theoretically, when you sell, the portion that’s been depreciated doesn’t qualify as personal residence, so doesn’t get the personal residence exemption. Sales price has to be allocated between personal residence and depreciable business property. Depreciation gets recaptured as ordinary income (I can’t remember for sure on this, maybe slightly better than ordinary rates) and the balance is taxable as a long term capital gain.
I say theoretically because sometimes this gets ignored or forgotten, even by tax professionals. Unless of course the home is sold at a loss. In which case the loss attributed to the business portion is fully deductible as an ordinary loss and not subject to capital loss limitations.[/quote]
SK, thank you for sharing your knowledge. I appreciate you schooling me and for more detailed questions, I’ll talk to an accountant. I just wanted some general answers…
One question though… For a primary residence, if you sell your home less than it’s worth, you can’t write it off.. So if I understand you correctly, with a home office deduction, than this becomes possible (as an offset to whatever gain was reported in the depreciation of the home office)?
