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In previous years I took actual expenses for business use of home. In 2021 I want to use the simplified method. I rent not own a house. Do i recapture deprecation?

Forum|Forum|4 years ago
March 24, 2022
3 replies
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Again I rent but don't own a house. I read online about recapturing deprecation. Does this apply to me? Can I just make the switch?

TurboTax Self Employed Online

Best answer by PattiF

Yes, you can switch back and forth between actual expenses to the simplified method for business use of home from year to year. You have to use the same method all year. But, you can use a different method next year if you like.

M

MAK70

When you sell the home you depreciated, you must add the depreciation (recapture) when determining the gain on the sale of the house. If you have not sold the house yet, you do not have to do this yet.

You can go ahead and use the simplified method this year,

C

confusedabouttaxes23Author

It is an apt not a house so I rent. So in actual method I never used deprecation as it was not even an option I think. So does switching means this issue does not even apply to me?

Carl11_2

Employee

Since you do not own the property you live in where you are claiming a home office, depreciation is not an option. You can't depreciate property that you do not own. So you continue using actual expenses, which would include (if I recall correctly) a percentage of the rent you pay that applies to the percentage of rented floor space which you claim as a home office.

C

confusedabouttaxes23Author

So I cannot switch at all just because I rent my apt instead of own a house. I never took the deprecation because its an apartment. So does this deprecation even apply to me because I never did that in the past?

P

PattiFAnswer

Yes, you can switch back and forth between actual expenses to the simplified method for business use of home from year to year. You have to use the same method all year. But, you can use a different method next year if you like.

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C

confusedabouttaxes23Author

@PattiF @PatriciaV @GeorgeM777 @Carl11_2 @MAK70

Sorry just thought of another question. Can I use Simplified business use of home if my apt rent is less than the $5 sq foot that is allowed by IRS? I was looking online and many apartments in my area and outside my state are less than $5 per sq foot. So is that allowed or do I need to use actual method just because my apt is less than $5 per sq foot?

Carl11_2

Employee

Yes, you can use the simplified method. But do take note of all of the highlights (every one of them) of the simplified method at https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction

Basically, when you switch from the normal depreciation method, it's up to you to keep track of depreciation already taken using that method, as the program will not (and can not) track it for you. This will come into play in the year you move or dispose of the business.

One nice thing about the simplified method for a renter that does not own their home, is that there's no depreciation recapture to deal with provided you used the simplified method every year since opening the business/claiming the home office.