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Tax Implications for Selling Homes With a Home Office

Posted by Admin Posted on Mar 14 2019



For many years, small business owners have deducted expenses due to their home office. For example, if 20 percent of your home gets used as an office, you can deduct up to 20 percent of home maintenance expenses as an actual business expense.


But if you're getting a deduction on your home office and you decide to sell your home, does your home office qualify as income from your property sale? Can the sale of the office portion of your home still qualify for the home sale tax exclusion? Does it get treated separately?


You will need to ask yourself two questions to best determine how to handle this situation.



Where in Your Home Is Your Office Located?


If your home office sits within the four walls of your house, then the good news is that you don't have to split up the profit of your home sale between your personal and business taxes. 100 percent of your financial gain will qualify for the home sale tax exclusion. However, depending on the way you filed your particular deduction, you might still owe some taxes.


If your home office is located in a structure such as a garage or a shed, you will need to treat your office as a sale of two separate properties. You will also need to pay taxes on the portion of your home that represents your former office.


If you know that you're selling your home well before you file taxes, try moving your business operations indoors. If you don't use that separate office structure in the year before you sell your home, you won't have to pay taxes on it.





Depending on the deductions you take out, you might owe additional taxes. If you and your CPA Las Vegas plan to take deductions on your property's individual expenses, you probably took the deduction for depreciation. If you did this, you will need to pay taxes on the deductions for depreciation that you took out over the years.


Those who took out the simplified deduction that lets you calculate the deduction based on your office's square footage will find themselves in a different situation. Their depreciation expenses will get treated as zero. As a result, you won't owe any additional taxes.