How to Figure the Depreciation Percentage on a Home for Business
One of the benefits of the home office deduction is that you can claim depreciation of your home as a business expense. But claiming depreciation for a home office can be a bit confusing, since you need to come up with two different percentages to calculate your deduction. You must first find the business-use percentage, which basically represents the percentage of your home used for business. Then you must find the depreciation percentage, which represents the percentage of your home's value that you can depreciate in any given year.
Determine the area of your home used exclusively for business. You can calculate the square footage, or you can go by the number of rooms, as long as all of the rooms in your house are of similar size.
Determine the total area of your home.
Divide the business portion of your home by the total area of your home to find the business-use percentage. For example, if you have eight rooms in your house and you use one entire room for an office, your business-use percentage is 12.5 percent.
Determine when you began claiming the home office deduction. If you have already claimed the deduction in previous years, your depreciation percentage for the current year is 2.564 percent. This number is based on a 39-year depreciation schedule, with the assumption that if you depreciate your home by 2.564 percent every year, by the 39th year you will have depreciated the home 100 percent.
Use a prorated depreciation percentage if you just began using your home for business during the year for which you are claiming the deduction. If you only used your home for part of the year, you cannot claim an entire year's worth of depreciation. The table listing the prorated depreciation amounts can be found in the instructions for Form 8829, "Expenses for Business Use of Your Home."
Use a prorated depreciation percentage if you stopped using your home for business during the year. In this case, count the number of months or partial months you used your home for business. Divide the number of months by 12, and multiply the result by 2.564 percent to get the depreciation percentage.
Calculate your total depreciation deduction by multiplying your business-use percentage by your depreciation percentage, and then multiply this figure by your cost basis in your home or its fair market value at the time you began using it for business, whichever is lower.
To qualify for this deduction, the home office must serve as the principal location of your business.