Academic journal article Journal of Accountancy

Remodeling May Be More Costly Than Anticipated

Academic journal article Journal of Accountancy

Remodeling May Be More Costly Than Anticipated

Article excerpt

Individual

REMODELING MAY BE MORE COSTLY THAN ANTICIPATED

Taxpayers who have offices located in their homes often worry about their ability to deduct office costs on their personal returns. Internal Revenue Code section 280A, in general, provides that expenses incurred in maintaining an office in a taxpayer's home, which otherwise meet the business use criteria, are limited to the gross income generated by such business less expenses deductible under other sections of the code (for example, interest and taxes).

If, however, the office is in a separate dwelling unit attached to the home, the deductions should be allowed in full.

By remodeling his home, a taxpayer caused a once separate basement to become an integral part of his home and subjected himself to the home office deduction rules (K.C. Burkhart, 57 T.C.M. 1251).

When the taxpayer purchased a two-story apartment building with a full basement, all three floors were being used as residential flats. The basement had separate kitchen, bathroom and sleeping facilities as well as a separate entrance. Following the purchase, the basement was converted to a photography studio used by the taxpayer in his business of professional photography. …

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