Political Quotes

“In 1997 Congress made an important change in the tax code for small businesses by restoring the home-office deduction. That change opened the door for millions of Americans to operate successful small businesses from their homes. Now the home-based financial planner or landscape can use an extra bedroom or a basement to conduct her business without the cost of commercial office space. In many cases, these home offices also allow today's entrepreneurs to spend more time with their family by avoiding the added time and expense of day-care and commuting. With the restoration of the home-office deduction, however, came a significant new complexity for home-based businesses, depreciation recapture. If a home-based medical transcriber elects to claim the home-office deduction, she will deduct the expenses relating to her home office, such as a portion of her home-owners insurance, utilities, repairs, and maintenance. She is also entitled to depreciate a portion of the cost of her house relating to the home office. But there is a big catch. When the home-based business owner sells her home, she must recapture all of the depreciation deductions and pay income taxes on them, even though her house qualifies for the exclusion from tax for the sale of a principal residence. The specter of depreciation recapture has several significant ramifications.”