Depreciation of Assets for a Home office

Forum|Forum|1 year ago
April 5, 2025
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If I have a home office and I'm using the actual expense method but I find the depreciation part to make no sense with respect to the actual useful life of the asset.

So for example I purchased the installation of a new water heater. My home office uses a good portion of the house strictly for business use. The water heater is necessary and has business use. I already understand how the business use is allocated based on space used for business divided by the entire house square footage.

My question relates to adding assets for a home office. The TurboTax software assigns a 39 year straight line depreciation for the asset. This makes no sense because the water heater is not going to last 39 years. So I will never be able to fully depreciate the business use portion of this newly installed asset based on the TurboTax software. Why is TurboTax doing it this way ? and why can't I use a section 179 deduction for the business portion of the water heater ?

KrisD15

You can add a business asset and depreciate it, but home office expenses include depreciation on the home only.

For example, you can buy a desk for the home office and enter it as a business asset and depreciate it over 7 years.

Purchasing a water heater for the home is not the same. It becomes part of the house and you can claim an expense for the hot water you use for the office.

You can ADD a second water heater and claim that as a business asset if it's only used for the office.

You can even add the water heater as if it was an improvement to the house and depreciate it over 39 years, which it seems was what you did, but I would argue against it unless the house did not have a water heater before you added this one.

Also, be aware that when you sell, all the depreciation you take for the home office will need to be recaptured unless you sell at a loss, which is uncommon. Depreciation Recapture is taxed as Ordinary Income at your tax rate.

[Edited 4/5/2025 I 2:24pm PST]

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