What Is Home Office Depreciation?
If you’ve been taking the home office deduction, you may have heard something like this: “Don’t take depreciation—it’ll come back to bite you when you sell your house.”
It sounds logical. Nobody likes the idea of paying taxes later. But here’s the problem… skipping home office depreciation can actually cost you more than it saves. Let’s walk through why.
What Is Home Office Depreciation?
If you qualify for a home office, the IRS allows you to deduct a portion of your home as a business expense—including depreciation. Depreciation is simply a way of recognizing that your home (or the business-use portion of it) wears out over time. If you’re not sure whether you qualify for a home office in the first place, you can start at one of our earlier posts: Can You Deduct a Home Office?
Why Some People Skip Home Office Depreciation
The concern usually comes down to one thing: taxes when you sell your home. When you claim depreciation, part of your gain when you sell can be taxed. This is called depreciation recapture.
So the thinking is: “If I don’t take depreciation now, I won’t have to deal with it later.” Seems reasonable—but that’s not how it actually works.
The Problem with Skipping Home Office Depreciation
Here’s where things get a little frustrating (and where a lot of people get tripped up). The IRS uses something called “allowed vs. allowable” depreciation.
- Allowed = what you actually claimed
- Allowable = what you were supposed to claim
And here’s the key point:
The IRS assumes you took the deduction—even if you didn’t.
So if you skip depreciation:
- You lose the deduction today
- Your home’s basis is still reduced
- You could still pay tax later
That’s the worst of both worlds. This is more common than you think.
Can Skipping Depreciation Lead to Double Taxation?
In some cases, yes. You may:
- Pay more taxes now because you didn’t take the deduction
- Still owe taxes later because your basis was reduced anyway
That’s why skipping home office depreciation usually doesn’t accomplish what people think it will.
What Happens When You Sell Your Home?
When you sell your home, depreciation is factored into the gain. But there’s an important detail here. If your home office is inside your primary residence, you may still qualify for the home sale exclusion (up to $250,000 if single, $500,000 if married). If you want to understand how to structure your home office properly to stay compliant, this article breaks it down:
Home Office Deduction: Pass an IRS Audit Without Raising Red Flags
So… Should You Take Home Office Depreciation?
In most cases, yes. Here’s why:
- You get the tax benefit now
- The future tax impact is often smaller than you think
- You avoid leaving money on the table
There are also ways to reduce or eliminate the long-term impact, depending on your situation. If you’re not clear on what qualifies as proper use of your home office, this is another helpful resource:
What Qualifies as “Regular Use” for a Home Office?
The Bottom Line on Home Office Depreciation
Skipping home office depreciation might feel like the safe move—but it usually isn’t. More often than not, it just means paying more taxes now… without avoiding taxes later. And if you’re self-employed, those missed deductions can add up over time.
Not Sure What the Right Move Is? Let’s Talk
Every situation is a little different—especially when it comes to home offices and long-term planning. If you want to make sure you're handling this the right way, reach out. We’ll walk through your setup, your goals, and help you make the decision that actually makes sense—not just what sounds good on the surface.
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