Sunday, January 23, 2011

Depreciation of Your Home

**This is a re-post from We Sell on eBay

I am going to be honest here. I feel like I'm quite out of my league with this section, so please please PLEASE, double check the instructions for yourself or check with a tax accountant.

We're finishing up the Form 8829 (Business Use of Your Home). It should be quick - there are only a few lines left.

Line 36 - Enter the smaller of your home's adjusted basis or its fair market value. I'm not sure where you could find that information other than an appraisal. Fortunately, our county just required appraisals sometime during the last year or so, so I happen to have my number handy. I hope yours is as easy to find as mine.

Line 37 Value of land included in line 36. That's pretty self-explanatory.

Line 38 - Basis of building. Subtract line 37 from 36. Also self-explanatory.

Line 39 - Business basis of building. Multiply line 38 by line 7. This gives you the value of the portion of the home that you use for ebay.

Line 40 - Depreciation percentage. If you used your home for business during all 12 months of the year, then your percentage is 2.461%. If you started using it later in the year, then you'll need to consult the chart in the Form 8829 instructions. (There are more numbers in this chart. This is just a small section of it.)

Line 41 - Depreciation allowable. Multiply line 39 by line 40. Enter result here and on line 29. If you improved your home or added on, you'll need to read the instructions for this section. Otherwise, just do the multiplication and enter the result on both line 41 and line 29.

Line 42 and Line 43 are basic math problems.

That finishes up the Form 8829 for Business Use of Your Home. You'll need to transfer the number from line 35 of this form onto line 30 of your Schedule C.

The rest of Schedule C, Page 1 (above) is pretty self-explanatory too. I will get to Page 2 of the Schedule C, as well as the Schedule SE, later this week.

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