Author Topic: Writing off home improvements as business expense question?  (Read 2727 times)

osirispdx

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Writing off home improvements as business expense question?
« on: February 01, 2016, 09:11:33 AM »
My business is designing and installing luxury home automation/home entertainment/security systems.  I am considering outfitting my own home with a system more similar to what I commonly install in my clients' homes (my system is currently modest, as you would imagine for a reader of this site).  I would be doing this primarily to use it to demonstrate what I do to potential clients, friends, etc.  Would this be considered a tax-deductible expense, or is it going to be an issue because it's also my personal home and not just a "showroom"?  I'm not looking to write off any expenses outside of the actual equipment itself, and maybe some of my labor time if it would be acceptable.

NonprofitER

  • Stubble
  • **
  • Posts: 246
  • Location: Texas
  • Reaching FIRE w/ High Purpose (Low Pay) Nonprofit
Re: Writing off home improvements as business expense question?
« Reply #1 on: February 01, 2016, 11:51:56 AM »
There are far more educated tax gurus than me on this forum, but I just spent the weekend working through self-employment tax forms and rules, so...

One way to consider it would be just to list the cost of the entertainment system as "equipment" re business expense and depreciate it, say, over 3 years on Form 4562.

I wouldn't think you could include the space itself as a "home office" type deduction, given that you would't be operating your business out of your living room (or in the IRS' eyes, using the living room exclusively for business purposes).  FWIW, I've heard the IRS can be more suspicious of items listed on Form 4562 (things like photography equipment, laptops, electronics etc. that are used for business purposes - technically, you should go to some trouble to show the % you use it for business purposes versus personal use and only deduct the business percentage....).

GrowingTheGreen

  • Bristles
  • ***
  • Posts: 355
    • Growing The Green
Re: Writing off home improvements as business expense question?
« Reply #2 on: February 01, 2016, 04:56:36 PM »
I'm no tax expert, but this raises red flags for me.

Axecleaver

  • Magnum Stache
  • ******
  • Posts: 4155
  • Location: Columbia, SC
Re: Writing off home improvements as business expense question?
« Reply #3 on: February 05, 2016, 08:39:10 AM »
If you file a schedule C, declare it as a sec 179 deduction rather than depreciating it. It seems legit to me. I wouldn't try to expense the labor unless you hired someone else.

bacchi

  • Walrus Stache
  • *******
  • Posts: 7056
Re: Writing off home improvements as business expense question?
« Reply #4 on: February 05, 2016, 07:51:52 PM »
No on your own labor.

Tabaxus

  • Bristles
  • ***
  • Posts: 452
Re: Writing off home improvements as business expense question?
« Reply #5 on: February 07, 2016, 09:19:15 AM »
My business is designing and installing luxury home automation/home entertainment/security systems.  I am considering outfitting my own home with a system more similar to what I commonly install in my clients' homes (my system is currently modest, as you would imagine for a reader of this site).  I would be doing this primarily to use it to demonstrate what I do to potential clients, friends, etc.  Would this be considered a tax-deductible expense, or is it going to be an issue because it's also my personal home and not just a "showroom"?  I'm not looking to write off any expenses outside of the actual equipment itself, and maybe some of my labor time if it would be acceptable.

As a general matter, the IRS loves to attack people who try to claim that things they've done with their own home somehow qualify as business expenses.  Not giving any advice here, but I am saying that I sure as heck wouldn't feel comfortable taking this deduction myself.

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2266
  • Age: 58
  • Location: Ann Arbor, Michigan
Re: Writing off home improvements as business expense question?
« Reply #6 on: February 08, 2016, 12:23:46 PM »
If you had a strictly business use portion of your home, then you could take a % of the square feet of the home used solely for business, and use that % to deduct the business portion of this system you install.

Fishindude

  • Magnum Stache
  • ******
  • Posts: 3075
Re: Writing off home improvements as business expense question?
« Reply #7 on: February 08, 2016, 12:58:56 PM »
I'm able to do a little of that here and there, since we live on a farm that generates some income.
Talk to your accountant.