Question

I have a new CPA who tells me that I have to account for depreciation on my home office whether or not I claim it, including paying the dreaded recapture tax on the deductions I did not claim. Is this true?

Your CPA is talking about allowed and allowable depreciation. Allowed is what you claimed. Allowable is what you should have claimed.

Example. You claimed zero (allowed amount). The right amount is $1,000 (allowable amount). The IRS adjusts your allowed amount to the proper allowable amount but gives you nothing. Next, you pay the depreciation recapture tax on the $1,000 of depreciation you failed to deduct. This is a true double whammy (double tax): (1) no deduction, (2) then a tax on the deduction you did not claim.

Avoiding the Double Tax Whammy

The double tax whammy generally applies to allowed and allowable depreciation, but ... Log in to view full article.