Tax Tip of the Week
900 N. Kings Highway, Cherry Hill, New Jersey 08034
856.667.4100 ·
215.563.0276 ·
Fax: 856.667.3652
For the week of
September 11, 2000
Don't lose out on depreciation
Some taxpayers who have a qualified home office would rather
not take the depreciation deduction that is allowed.
The tax laws have a provision that is called "allowed or allowable" depreciation. This means that you
will be considered to have taken the amount of depreciation allowable even if you do not take a tax deduction for
it.
Take this example:
The taxpayer takes his legitimate home office deductions for utilities, insurance, repairs, etc., based on the
percentage of the home used as an office. Let's assume that he was also entitled to take a depreciation deduction
of $1,000 per year. Let's say that he uses the home office for ten years and never claims his depreciation.
When the home is sold, he will be treated as selling two kinds of property. Gain on the personal residence portion
will be excluded from tax to the extent it doesn't exceed $250,000 if he's single or $500,000 if he files a joint
return. But the office (business) portion will be subject to tax and the "allowable" $10,000 of depreciation
will be treated as though it had been taken, and it will increase the gain on the business portion of the sale.
If we can be of assistance with your tax and
financial matters, please contact us. We are here to see that you pay no more tax than the law requires.
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