Benefits with Commonwealth of Virginia Members

Deducting Repairs to Your Home Office

If you have an office in your home that qualifies for the home office deduction, you’ll be able to deduct a variety of home expenses. These include not only a portion of your rent or mortgage payments and utilities, but some home repairs as well. The ability to deduct repair costs is particularly valuable, because they ordinarily are not deductible at all for a homeowner. To know whether, and how, to deduct a repair as part of your home office deduction, you need to answer two questions:

• is the expense a repair or an improvement?
• if it's a repair, is it a direct or indirect expense?

Is It a Repair or an Improvement?

The cost of repairs to business property is a currently deductible business expense—that is, you can deduct the entire amount in a single year. On the other hand, if an expense constitutes an improvement to your home instead of a repair, the cost will have to be depreciated over many years. Determining whether an expense is a repair or an improvement can be difficult. However, the basic rule is that you must depreciate an expense you incur to:

• make a long-term asset much better than it was before
• restore it to operating condition, or
• adapt it to a new use.

Expenses you incur that don’t result in a betterment, restoration, or adaptation are currently deductible repairs. For example, replacing the entire roof of your home is an improvement. Replacing a few roof shingles with new shingles of equal quality is a repair. Similarly, replacing the wall-to-wall carpet in your office is an improvement. Fixing a hole in your existing carpet is a repair.

Is It a Direct or an Indirect Expense?

The IRS divides home office expenses into two categories: direct expenses, which benefit only your home office, and indirect expenses, which benefit both your office and your home.

Direct Expenses

You have a direct home office expense when you pay for something just for the home office portion of your home. The entire amount of a direct home office expense is deductible.

Example: Jean pays a handyman $100 to fix the window in her home office that won't close properly. She may deduct this entire amount as part of her home office deduction.

Indirect Expenses

An indirect expense is a payment for something that benefits your entire home, including both the home office portion and your personal space. You may deduct only a portion of this expense—the home office percentage of the total.

Example: Jean pays $1,000 to repair the roof on her home. This is an indirect expense because it benefits her entire home. She may deduct her home office percentage of the expense. She uses 15% of her home as an office so she may deduct 15% of the cost, or $150.

You can deduct the home office percentage of home maintenance expenses that benefit your entire home, such as housecleaning of your entire house, roof and furnace repairs, and exterior painting. These costs are deductible whether you hire someone or do them yourself. If you do the work yourself, however, you can only deduct the cost of materials, not the cost of your own labor. Termite inspection, pest extermination fees, and snow removal costs are also deductible. Home maintenance costs that don’t benefit your home office—for example, painting your kitchen—are not deductible at all.