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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Hello- My wife and I are 100% owner of our s-corp and maintain

Resolved Question:

Hello-

My wife and I are 100% owner of our s-corp and maintain a home office. our business is expanding, and we would like to build a detached studio above our detached garage to move the business into.

What are the tax implications of this? Is it deductable?

Thank you,
Aaron
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Hello, Aaron

Megan C :

Congrats on your expanding business!

Megan C :

The cost of the studio will be capitalized and depreciated over 27.5 years

Megan C :

You cannot write off the entire expense currently.

Megan C :

Once operational, you can deduct the cost of utilities, repairs, anything to do with that particular office

Customer:

Can we charge the business reasoble rent for the space and put it on our schedule ?e

Megan C :

Well, the problem with that would be that you would then have to claim rental income on your personal return, and that would mean you would deduct rent and claim rental income at the same time, which is a wash

Megan C :

If you charge rent, you can't depreciate.

Megan C :

But yes, you could claim rent and put it on schedule E

Megan C :

But you can set up an accountable plan and then you would pay reasonable rent and would not have to claim the amount as income

Megan C :

You can read more about that, here: http://www.taxalmanac.org/index.php/Home_Office_Expenses_of_a_One-Man_Corporation

Megan C :

And you can find a blank copy of an accountable plan template here: http://rockstarcpa.tumblr.com/post/17363280552/s-corp-home-office-deductions

Megan C :

Do you have any further questions about this?

Megan C :

If not, please rate as "excellent" so that I may receive credit for assisting you today

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