Deducting Mix Use Shop Space


From original questioner:

Just finished my first year of professional woodworking. Didn't make much, but that's to be expected. I own my shop building, which is 3200 square feet. However, it is not exclusively used for my business purposes; I also use it for personal storage, car repairs, various home projects, etc. Was wondering how others have treated such a situation in their tax filings. It's that "exclusive use" clause in the code that has me concerned.

From contributor ca

Are you serious ? Don't you just use the space for personal projects on the weekends ?

The best way around this is - the business, which is an LLC, pays you and your wife or a trust rent every month.

From contributor Se

Unless the address is the same as your residence I doubt it would ever get questioned.

From contributor Ch

Thanks guys. Here's a little history of my shop. My wife and I bought 12 acres many years ago and built this shop. I designed it with a 40x40 workshop space, a 20x40 single bedroom apartment, and a 20x40 finished out storage area (second floor above the apartment). We lived in the apartment for 3 years; then built our house 50 feet away. I've converted the bedroom (which was in the back side of the apartment) into a dedicated finishing room (20x12). Also, I have an office room upstairs (13x12).

So, the actual shop space is used for many things but 98% of the time it's for business. Thank you for the LLC suggestion; that seems like something I should do for more than just this reason.

From contributor Ch

Check your state sales tax rules on commercial space rental. For example, in Florida, any rent that a company pays for the building or property it uses is subject to sales use tax. They call it commercial property. The property owners must collect the tax and then send it to the state department of revenue. And, it does not matter to the state if the owner of the building also owns the business. Or, if the business is paying any building mortgage directly, that amount is also taxable. It's just another way to fund the state government. Most states do not have this, but check it out just in case your state does.

Also, the owners of the building will now have to report the rent as income. A good CPA can handle this appropriately.