- Tax Deductions for Depreciation of Renting a Home
- Do I Need a Primary Residence to Use a Vacation Home as a Tax Write-off?
- How to Calculate Taxes on the Sale of Personal Residences
- How Soon Does Money From Selling a House Have to Be Invested So No Capital Gain Tax Is Paid?
- Can Homeowners Insurance Be Claimed on Taxes?
- Can You Claim a Homestead Exemption if Your Home Is Not Paid For?
One significant benefit of home ownership is the ability to write off some of the costs of owning a home when you file your federal income tax return, including your mortgage interest and state and local property taxes. You might also be able to deduct depreciation on a portion of your primary home if you use it for business as well as residential purposes.
Depreciation is a business term that refers to the useful life of an asset. Buying an asset, such as a building, is part of the cost of doing business, and depreciation is an allowance the Internal Revenue Service allows the business to take to compensate for ordinary wear and tear. The depreciation allowance reduces the business's taxable income. If you use your home 100 percent for personal purposes, you cannot claim any home depreciation on your taxes.
There is considerable debate about what constitutes your primary house, but there are some common sense guidelines. Your primary house, sometimes referred to as your first home or primary residence, is the place where you live most of the time. The IRS does not require you to use your primary house exclusively as a residence. If you operate a business out of your home, use a portion of your home regularly and exclusively for business, or rent out a portion of your home, part of your primary house might qualify for the depreciation deduction.
You can depreciate the portion of your primary house that you use exclusively for business purposes. However, you can't claim business use of a portion of your house you use for both business and personal purpose. For example, if you regularly meet with clients at your dining room table, but you also eat your meals with your family around the dining room table, you cannot depreciate the area of the dining room. One exception to the the exclusive rule is if you use part of your home to store inventory.
How you deduct depreciation on your primary house depends on whether your business use of the home was as an employee or as a business owner. If your deduction was for employee business expenses you must itemize your deductions and claim your depreciation on Schedule A of IRS Form 1040. If you claim depreciation on your home as part of your business, you must report the expense on Schedule C. You can deduct your business expenses, including depreciation, on Schedule C regardless of whether you itemize your deductions or not.
- Reparaturarbeiten image by Elke B. from Fotolia.com