When determining how much to depreciate for your home, use the lower amount of the purchase price of your home or the fair market value of your home when your business began. This amount will stay the same each year.

Example: Purchase price of home in 2001: $200,000; Fair market value of home in August 2011 (month business began): $230,000

2011
$200,000 x 40% (time-space) = $80,000
$80,000 x .963% (first year depreciation based on month business began) = $770

2012
$200,000 x 40% = $80,000
$80,000 x 2.654% (amount to claim for a full year under 39 year depreciation rules) = $2,123

2013
$200,000 x 42% (time-space went up this year) = $84,000
$84,000 x 2.654% = $2,229

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