Can I write off building a detached garage as a business start-up cost?

The garage construction wouldn't qualify for a full write-off as a start-up cost, but you have several tax options here. Building a garage is considered a capital improvement to your property, so you'll need to depreciate the cost over time (typically 39 years for commercial property or 27.5 years for residential rental property). Since you're using it for business, you'll depreciate based on the percentage used for business purposes. For your home office deduction, yes, you can include a detached garage in your calculations if it's used exclusively and regularly for business. The garage would be considered part of your property for this purpose. If you use 100% of the garage for business (both the office and storage), you could potentially deduct that entire percentage of your property expenses. As for start-up costs, the IRS allows deducting up to $5,000 in the first year, with amounts over that being amortized over 15 years. But construction costs wouldn't qualify as start-up expenses - they're capital expenditures.

After struggling with a similar situation last year, I found an amazing tool that helped me figure out exactly what I could deduct. Check out https://taxr.ai - it analyzes your specific situation and gives you personalized guidance on business deductions like this. I uploaded pics of my property plans and some documentation about my business setup, and it gave me a detailed breakdown of what could be immediately expensed vs. what needed to be depreciated. It's way more specific than general advice online because it looks at your actual documents and circumstances. The tool showed me several deductions I was missing and explained exactly how to handle my workspace expansion correctly on my tax forms. Definitely worth looking into for your garage project!

I was initially skeptical about taxr.ai when I saw it mentioned here, but I decided to try it for my situation (converting part of my property for business use). I uploaded my property documents, business plan, and current tax info and was seriously impressed. The analysis showed me that while I couldn't expense the entire building cost upfront as I'd hoped, I could separately categorize certain components (like specialized storage systems and security) as business equipment with much faster depreciation schedules. This alone saved me thousands compared to depreciating everything together over 39 years. It also suggested a cost segregation strategy I hadn't considered that maximized my first-year deductions while staying compliant. Definitely made my garage conversion project much more tax-efficient!

I had to deal with the IRS about a similar home business expansion last year, and it was a nightmare trying to get clear answers about what was deductible. After being on hold for literally 3+ hours multiple times, I found https://claimyr.com which got me connected to an actual IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with gave me specific guidance on my garage conversion and confirmed exactly which expenses could be depreciated vs. expensed. Having that documented conversation with the IRS gave me peace of mind that I was doing everything correctly. Much better than trying to interpret vague info online.

I had to deal with the IRS about a similar home business expansion last year, and it was a nightmare trying to get clear answers about what was deductible. After being on hold for literally 3+ hours multiple times, I found https://claimyr.com which got me connected to an actual IRS agent in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with gave me specific guidance on my garage conversion and confirmed exactly which expenses could be depreciated vs. expensed. Having that documented conversation with the IRS gave me peace of mind that I was doing everything correctly. Much better than trying to interpret vague info

I need to publicly eat my words about Claimyr. After my skeptical comment, I decided to try it anyway out of desperation with my tax situation. I was 100% prepared to come back here and expose it as a scam. Instead, I got connected to an IRS representative in about 20 minutes. For comparison, I had previously spent over 5 hours on hold across multiple days trying to get through on my own. The agent I spoke with clarified exactly how to handle my mixed-use garage conversion on my taxes. She explained the depreciation requirements and gave me specific guidance on form 8829 for the home office portion. Having an actual IRS employee confirm my approach saved me from potentially making expensive mistakes.

I built a workshop/storage building for my business last year, and based on my experience, definitely talk to a CPA before you start construction. The tax treatment gets complicated fast. One thing that really helped me maximize deductions: I itemized everything in the construction that could be considered separate from the building itself. Things like specialized electrical work, HVAC specific to inventory needs, security systems, and specialized shelving/storage solutions can often be depreciated on a 5-7 year schedule instead of the 39 years for the building structure. This approach, called cost segregation, made a HUGE difference in my first-year tax deductions.

Don't forget about Section 179! Depending on your total business income, you might be able to use Section 179 to deduct some of the costs in year 1. Though the building itself wouldn't qualify, many of the components inside it might. Also, have you considered leasing a small warehouse space instead? Sometimes the numbers work out better for a new business than tying up capital in construction. Just another option to consider.

One thing I haven't seen mentioned yet is the potential impact on your property taxes. When you build a detached garage that increases your property value, your local assessor will likely reassess your property and increase your annual property taxes accordingly. However, if you're using the garage for business purposes, you may be able to deduct the portion of property taxes that corresponds to your business use. So while your total property tax bill will go up, you'll get to deduct the business portion on your federal taxes. Also, make sure to check with your local building department about any zoning restrictions for home-based businesses. Some municipalities have specific rules about operating businesses from residential properties, especially when it involves storage of inventory for resale. The depreciation and cost segregation advice above is spot-on, but don't overlook these ongoing costs and compliance issues that could affect your long-term business planning.

I went through a very similar situation two years ago when I built a 30x40 detached garage for my consulting business and product fulfillment operation. Here's what I learned that might help: The depreciation timeline really depends on how you classify the space. If it's mixed-use (both office and storage), you'll need to allocate the costs based on square footage and usage. I was able to depreciate my office portion over 27.5 years (residential rental property rules) and the commercial storage portion over 39 years. One major thing I wish I'd known: document EVERYTHING during construction with photos and separate invoices. I was able to pull out about $18k worth of items that qualified for faster depreciation - things like the overhead door system, concrete floor coating for inventory protection, specialized electrical for business equipment, and security cameras. Also, consider the timing of your construction. If you can complete it and place it in service before year-end, you can start depreciating immediately. But if you're close to the deadline, it might be worth waiting until January to avoid a partial-year depreciation calculation. The home office deduction calculation gets a bit tricky with a detached garage, but yes, it counts toward your total property for percentage calculations. Just make sure you're using it exclusively for business to avoid any IRS issues down the road.

@Diego Chavez - I'm a tax preparer and see situations like yours regularly. A few additional considerations that haven't been fully covered: For the exclusive business use requirement, you need to be very careful about documentation. The IRS can be strict about this - even storing personal items in one corner can disqualify the entire space. I recommend installing a separate entrance if possible and keeping detailed logs of business activities in the space. Regarding your dual-purpose question (office + storage), you can absolutely claim the home office deduction for a detached garage. The key is that it needs to be used regularly and exclusively for business. The square footage calculation would include the garage as part of your total property. One strategy I often recommend: if you're planning to use the space for two different businesses (your existing sole proprietorship and the new importing venture), make sure you properly allocate expenses between both businesses. This can actually work in your favor for maximizing deductions. Also consider whether incorporating your importing business might make sense from a liability standpoint, especially if you're dealing with international suppliers and inventory. While it won't change the building depreciation rules, it could provide better protection for your assets. The construction loan interest is indeed deductible, but make sure you understand the difference between business interest and investment interest for tax purposes.

This is such a complex situation with multiple tax implications! Based on everyone's great advice here, it sounds like you definitely need professional guidance, but I wanted to add one consideration I haven't seen mentioned yet. Since you're planning to use this garage for both your existing sole proprietorship AND a new importing business, make sure you understand how the business use percentage will work if/when you eventually sell your property. The depreciation you claim now will need to be "recaptured" as taxable income when you sell, but only for the business portion. This depreciation recapture is taxed at up to 25% rather than capital gains rates, so it's important to factor this into your long-term planning. It doesn't mean you shouldn't take the depreciation - the time value of money usually makes it worthwhile - but it's something to be aware of. Also, if you do decide to incorporate the importing business as an LLC, consider whether you want the LLC to lease the space from you personally rather than you allocating costs between businesses. This creates a cleaner paper trail and might simplify things if the importing business grows significantly. The advice about cost segregation and documenting everything during construction is spot-on. Having worked in construction accounting, I can't stress enough how important those detailed records and photos will be for maximizing your deductions!

This thread has been incredibly helpful! As someone who's been researching this exact scenario for months, I want to add one practical consideration that might influence your decision timing. With current interest rates, the financing cost for your construction loan could significantly impact the overall economics. If you're planning to claim business interest deductions, make sure you understand how the IRS treats interest during the construction period versus after the building is placed in service. During construction, the interest typically needs to be capitalized (added to the building's cost basis) rather than deducted immediately. Only after you start using the garage for business can you begin deducting the ongoing loan interest. This could affect your cash flow projections, especially if construction takes several months. Also, given all the great advice about cost segregation and documentation, consider hiring a tax professional who specializes in this area BEFORE you start construction. They can help you structure the project and invoicing in a way that maximizes your depreciation benefits from day one. It's much harder (and sometimes impossible) to go back and restructure things after the fact. The point about potential zoning issues is crucial too. I'd recommend getting written confirmation from your local zoning office that your planned business use is permitted. Some areas have restrictions on the types or volume of commercial deliveries to residential properties, which could impact your importing business model.

As someone who went through a similar garage conversion project for my home-based business, I wanted to share a few additional insights that might help with your decision. One thing that really caught my attention in your post is that you're planning to use the space for TWO distinct purposes - moving your existing office AND storing inventory for a completely new business. This actually creates some interesting opportunities for tax optimization that haven't been fully explored in the thread. Since your existing sole proprietorship already qualifies for home office deductions, you have an established business use pattern that strengthens your position with the IRS. When you move that office to the garage, you're not creating a new business expense - you're relocating an existing one. This continuity can be helpful if the IRS ever questions your business use claims. For the importing business storage portion, consider starting small and documenting your growth. Even if you build the full garage now, you could initially designate a smaller storage area and expand the business use percentage as your inventory grows. This creates a clear paper trail showing legitimate business expansion rather than speculative space allocation. One practical tip: install a separate electrical meter for the garage if possible. This makes it much easier to track and deduct utilities, and it provides clear documentation of business versus personal use. The additional upfront cost often pays for itself in cleaner record-keeping and stronger audit defense. The key is treating this as a business investment decision, not just a tax strategy. Make sure the numbers work even without the tax benefits, then view the depreciation and deductions as a bonus rather than the primary justification.