Home Office Deduction Capital Gains Tax

When selling your home you ll be liable for capital gains tax on a portion of any capital gain. If you sell at a profit a home that contains or contained a home office the otherwise available 250 000 500 000 exclusion for gain on the sale of a principal residence won t apply to the. If using the floor area to claim your expenses make sure it s accurate and not just a guess.

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Just to remind you if she had not used part as a home office then the capital gains tax on the disposal of the property would have been nil as illustrated in the first part of the example.

Home office deduction capital gains tax. However wherever your home office was located you will have to pay a capital gains tax on the depreciation deductions you took after may 6 1997 for the office. The law allows an exclusion an escape from taxes on profit from the sale of a principal residence. If your home is your principal place of business you can claim income tax deductions for a portion of the costs of owning or renting maintaining and using your home for this purpose. This is the annual deduction you are allowed for the yearly decline in value due to wear and tear of the portion of the building that contains your home.

The exclusion amount is as much as 250 000 for single persons and married couples who file separate returns and 500 000 for married couples who file joint returns however if you use a portion of your home as a dedicated home office space it could complicate your exclusion eligibility. If we assume her marginal tax rate is 36 then approximately r3 840 capital gains tax will be payable i e. Discuss whether it s worth subjecting your house to capital gains or whether you may be better off sharing your home office with family and claiming 34 cents per hour as a tax deduction.