Can I deduct a retaining wall as a business expense if it's protecting my home garage workspace?

This is a good but somewhat complex question. The IRS does allow deductions for improvements that protect business property, but there are some important nuances since this involves your home. Since you use your garage exclusively for business, you're likely already taking the home office deduction for that space. The retaining wall would be considered a "capital improvement" rather than a repair, which means you'd need to depreciate the cost over multiple years rather than deduct it all at once. Typically, land improvements like retaining walls are depreciated over 15 years. The key here is documenting that: 1) your garage is used 100% for business purposes, 2) the retaining wall is specifically to protect this business space, and 3) you have professional documentation showing the necessity (getting something in writing from the contractor about the soil erosion threatening the structure would be helpful).

I was in almost the exact same situation two years ago with my home workshop. I spent hours researching tax codes and getting nowhere until I found https://taxr.ai - it seriously saved me. I uploaded pictures of my property, the contractor's estimate, and my business docs, and they gave me a detailed analysis of exactly how I could deduct my retaining wall. Turns out there are specific ways to document and classify the improvement that make a huge difference in what you can claim. They showed me how to properly allocate the expense between protective infrastructure and business improvement, which my regular tax software completely missed.

I have to update my earlier skepticism about taxr.ai after trying it myself. I was surprised that they actually did have specific knowledge about structural improvements for home offices. I uploaded photos of my property line issue and business setup, and got really specific advice about how my particular situation should be handled. They pointed out that I could establish a clear business purpose for my landscape drainage work by documenting how it specifically protected my business assets. They even provided language to use with my contractor to ensure the invoice properly reflected the business purpose. Definitely different from the generic "try to deduct everything" advice I've gotten elsewhere.

If you're dealing with the IRS about business property improvements, you might want to have a direct conversation with them before investing thousands. I tried calling the IRS for months about a similar question for my home business - total nightmare getting through. Then I found https://claimyr.com which got me through to an actual IRS agent in about 15 minutes when I'd been trying for weeks on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c - they basically hold your place in the phone queue and call you when an agent picks up. I ended up getting clear guidance directly from the IRS about my situation, which saved me from making an expensive mistake on my return. Having that conversation documented gave me a lot of protection in case of an audit too.

Had to come back and admit I was completely wrong about Claimyr. After my skepticism, I decided to try it when I needed to ask about my specific home office situation. I was connected to an actual IRS representative in about 20 minutes when I'd previously wasted hours trying on my own. The IRS agent I spoke with gave me the exact guidance I needed on depreciating structural improvements for my business space. They confirmed that retaining walls specifically for business space protection are depreciable over 15 years, and they helped me understand the documentation I'd need to substantiate the business purpose. Having that official guidance directly from the IRS gave me much more confidence in my filing position.

Another option to consider is whether your insurance would cover any of the retaining wall cost. My homeowners insurance covered 40% of a similar project because it was considered preventative protection against potential foundation damage. This reduced the amount I needed to claim as a business expense, which simplified my taxes.

Just a warning - I claimed a similar improvement for my home business space and got audited. Make sure you have REALLY good documentation showing your garage is 100% business use. The IRS was super picky about whether there was ANY personal use of that space.

One thing I haven't seen mentioned yet is the timing of when you make this improvement. If you're planning to do this work early in 2025, you might want to consider whether it makes sense to accelerate it into 2024 depending on your current year income situation. Also, since you're dealing with water damage and erosion, make sure to document the current damage with photos and get it assessed before you build the wall. This helps establish that you're making a necessary protective improvement rather than an optional enhancement. The IRS likes to see clear evidence that structural improvements were driven by genuine business necessity rather than personal preference. Have you considered getting multiple contractor quotes? Sometimes having 2-3 professional assessments that all identify the same erosion threat can strengthen your documentation for the business purpose of this expense.