USA Can I buy an apt, claim home-office deduction for 3-5 years, and then rent the property

[CP-Hey]

I am looking into buying a house/apt that I can live in for 3-5 years, and then start renting it out.

I know there are some complications around depreciation if you SELL the property after claiming the deduction. I was wondering if the same holds true for a home office that ultimately gets turned into a rental property.

1. Are there any tax consequences of claiming a home office deduction for 3-5 years and then renting the property to tenants? I would no longer live there or do business there, and likely begin to claim home office in another residence.

2. I don't completely understand the consequences if you were to sell - is this only if you claim depreciation as an additional expense? Or does it also come into play when you are just deducting the traditional % or simplified $5/sq ft methods as well?

3. I know I can write off interest on the mortgage. Would I ever have to pay anything back if I wrote off interest on my mortgage and then either sold or rented the property?



Thanks!

 

[smallbushelp]

1. No.
2. What consequences are you referring to? Your question is unclear.
3. Yes, you can claim a Schedule A deduction for mortgage interest on your primary residence. If you move and convert the property to a rental unit, you can still deduct the mortgage interest but it becomes a business expense and you'll have to file a Schedule E. You don't have to pay anything back if you sell the property.

 

[CP-Hey]

Thank you!

Your answers to 1 and 3 made it clear for me.

For 2, I just knew that if you deduct depreciation and then sell your property, it can bite you. I was just curious if there were any similar pitfalls to claiming a deduction one year and selling/renting the property the next.

 

[smallbushelp]

No, there are no pitfalls to claiming the home office deduction. But yes, taking a deduction for depreciation can affect your calculation of gain or loss when you sell a rental property causing you to have a higher capital gain.