Deducting Building costs when Business rents?

Question

Hi

I have both a sole propetiorship and an S-corp business which I currently run out of my home and I need more space.

If my business rents a property/space can I deduct the cost of fixing it up so it works for my business--which could be everything from insulating the place and adding appropriate heating and building shelves [I have a book business]? And if the answer is yes, would that also be true even if I own the building personally? And if the answer is yes to that, would it also be true if that building were on my property but freestanding/separate from my house?

thanks for your help,

Marshall

Answer 1

1.  You rent property/space and fix it up

Your rent, maintenance and repair are deductible.  If you make improvements to the property (new roof, etc.), those are depreciated over 39 years.  If you do a complete rehab of the place, the total amount is considered an improvement.

2. You own the building which separate from your property where your home is located.

The improvements you make to the space before you place it into service are added to the basis in the property.  The total is depreciated over 39 years.

3.  You own a separate structure on your property.

This would follow the office in home rules.  These rules are generally more restrictive than if the structure were not on your home property.  In particular, you cannot deduct a loss due to office in home, and you cannot deduct the office in home expenses if your business operates at a loss.  The rules are detailed in the IRS instructions cited below.