Can I claim Home Office Deduction for my converted Garage workspace?

Yes, you're on the right track with your understanding of the home office deduction for your converted garage. The Culp v Commissioner case does establish that a garage can qualify as a home office space, provided it meets the exclusive and regular use tests. For your specific questions: 1. Your calculation method is correct. You would add the garage square footage to your total home square footage, then calculate the percentage. So if your house is 1800 sqft and the garage is 400 sqft, your business use percentage would be 400/2200 = 18.2%. 2. For determining the basis for depreciation using the actual expense method, you'll need to separate the conversion costs from the original value. The basis would be the fair market value of the garage before conversion plus the costs of improvements specifically for business use. Keep detailed records of all renovation expenses (drywall, heating, electrical, etc.). 3. Yes, you're correct about depreciation recapture. When you sell your home, any depreciation you've claimed on the home office portion will be subject to recapture, even though you may exclude the overall gain under the primary residence exclusion. The recaptured amount is typically taxed at a maximum rate of 25%. I'd recommend comparing the potential benefits of the actual expense method versus the simplified method before making the switch. With the simplified method, you don't have to worry about depreciation recapture, but with a significant renovation, the actual method might provide better tax benefits in the short term.

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Just a heads up on something I learned the hard way with my garage conversion - if you're going to use the actual expense method, track EVERYTHING. I converted my garage last year and missed deducting some of the electrical work and insulation costs because I didn't keep proper receipts. Also, take pictures of the space before, during, and after the conversion. My tax guy said this documentation is super important if you ever get questioned about it.

I think everyone's missing an important point here. If you're doing a W2 job, you CANNOT take the home office deduction anymore after the Tax Cuts and Jobs Act! Only self-employed people can take it now.

Great question about the garage conversion! I want to add a few additional considerations that might be helpful: Since you're meeting clients in this space, make sure you're documenting the business meetings. Keep a log of client visits, business calls, and any other business activities conducted in the garage office. This helps establish the "regular use" requirement beyond just the "exclusive use." Also, consider the timing of when you can start claiming the deduction. You can only deduct expenses from the date the space was "placed in service" for business use - so if you finished the conversion in March but didn't start using it for business until April, your deduction would be prorated. One thing to watch out for: if your side business operates at a loss, the home office deduction can't create or increase that loss. The deduction is limited to the income from the business activity conducted in the home office. Finally, since you mentioned this is an attached garage, make sure there's proper separation from your main house if you're claiming it as a separate structure. The IRS looks at whether the office space is an integral part of your home or a separate structure, which can affect how certain expenses are calculated. Keep excellent records of everything - the conversion costs, ongoing maintenance, and business use documentation. Good luck with your tax planning!