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Ignore home-office deduction myth

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in Small Business Tax

Q. I’ve been advised by an accountant to pass up a home-office deduction because of the audit risk. Also, he says I would owe tax on the home office when I sell my home. What do you think? G.P., Marietta, Ohio

A. If you’re legitimately entitled to home-office deductions, you should claim the deductions on your return. There’s no evidence that this will increase your audit risk. But, it’s true that any depreciation attributable to a home office after May 6, 1997, must be recaptured at a maximum federal income tax rate of 25 percent. Tip: This recapture provision typically isn’t as onerous as it first appears because you save taxes in earlier years by deducting the depreciation.

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