I just read a Wall Street Journal article this morning that taking a deduction for a home office no longer requires you to pay taxes on that portion of your home, even if you sell it within two years of taking the deduction. Is this true?

Zip Code: Anonymous

I just read the same article. This spring, when things slow down here, I plan to confirm the information in the article. However, seeing that it appeared in the Wall Street Journal, it's probably accurate.



Basically, under the old interpretation of the rules, if you claimed the home office deduction during either of the two calendar years preceding the year you sell your home, you weren't able to exclude paying taxes on the portion of the gain equal to the portion of the home that was your home office. So if you realized a $100,000 gain in connection with the sale of your home, and you claimed 15% as the home office, you would pay taxes on $15,000 of capital gains.



Based on the WSJ article, if the home office is within your home (and not a separate structure on your property), then you're allowed to exclude the full amount of the gain on the sale of your principal residence, up to $500,000 if you're married or up to $250,000 if you're single, even if you claimed the home office in the year the home was sold, or during either of the previous two calendar years.

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Replying to:

I just read a Wall Street Journal article this morning that taking a deduction for a home office no longer requires you to pay taxes on that portion of your home, even if you sell it within two years of taking the deduction. Is this true?

Zip Code: cpa@mdtaxes.com

This is definitely the case. I just read into Pub 523 pg 17/18. You are allowed to exclude gains on your home office if you have lived in your house 2/5 years previous to your sale of your home. However, you are not permitted to exclude depreciation from your business on your home claimed in the preceding years.

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Replying to:

I just read the same article. This spring, when things slow down here, I plan to confirm the information in the article. However, seeing that it appeared in the Wall Street Journal, it's probably accurate.



Basically, under the old interpretation of the rules, if you claimed the home office deduction during either of the two calendar years preceding the year you sell your home, you weren't able to exclude paying taxes on the portion of the gain equal to the portion of the home that was your home office. So if you realized a $100,000 gain in connection with the sale of your home, and you claimed 15% as the home office, you would pay taxes on $15,000 of capital gains.



Based on the WSJ article, if the home office is within your home (and not a separate structure on your property), then you're allowed to exclude the full amount of the gain on the sale of your principal residence, up to $500,000 if you're married or up to $250,000 if you're single, even if you claimed the home office in the year the home was sold, or during either of the previous two calendar years.

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Replying to:

I just read a Wall Street Journal article this morning that taking a deduction for a home office no longer requires you to pay taxes on that portion of your home, even if you sell it within two years of taking the deduction. Is this true?

Zip Code: slee12@lumc.edu