Question: I own a house that is 2,857 square feet. During COVID, I started to work exclusively from my home, and I began to claim a home office deduction on my tax return. I am planning to retire later this year and place the home on the market with the goal of moving to an independent living facility. I bought the home in 1991 and should have a fairly large gain, but since I file a joint return with my wife, I expect that I will not pay any tax on the gain because of the $500,000 tax exclusion allowed by the IRS. My question relates to the office portion of the home. I am not clear how that will affect my taxes when I sell the home.
Answer: This can be a surprisingly difficult question because the answer depends on exactly how you have claimed the expenses for use of the office.
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