Should You Skip Home-Office Depreciation to Dodge Recapture?

January 05, 2026•6 min read

Should You Skip Home-Office Depreciation to Avoid Recapture?

Short answer: No.
Long answer: Also, no — and here’s why.

If you’ve ever claimed a home-office deduction, chances are you’ve heard the horror stories about depreciation recapture. And if you haven’t heard them directly, you’ve probably absorbed the fear indirectly through tax blogs, Facebook groups, or a well-meaning friend who “read something once.”

The result? A surprisingly common strategy that goes something like this:

“I’ll just skip depreciation on my home office so I don’t have to deal with recapture later.”

I get why this sounds appealing. Recapture feels like the IRS clawing back money you thought was yours. But here’s the problem: skipping depreciation doesn’t do what most people think it does. In many cases, it actually costs you more — sometimes twice.

Let’s walk through how this really works, in plain English.

The Fear: Depreciation Recapture

Depreciation recapture is one of those tax concepts that sounds worse than it usually is.

When you depreciate part of your home for a qualified home office, you’re essentially spreading the cost of that space over time and taking a deduction each year. When you eventually sell the home, the IRS wants to “recapture” some of that benefit by taxing the portion of gain attributable to depreciation.

For real property, this isn’t taxed as ordinary income — it’s taxed as unrecaptured Section 1250 gain, capped at 25%, which is often lower than your current marginal rate.

But instead of understanding the nuance, many taxpayers jump straight to avoidance mode.

The Mistake: “I’ll Just Not Take Depreciation”

Here’s where things start to unravel.

Tax law doesn’t let you opt out of depreciation just because you don’t like the consequences. Instead, it applies what’s called the allowed vs. allowable rule.

Let’s define that:

Allowed depreciation = what you actually claimed on your tax return
Allowable depreciation = what you should have claimed under the law

Ideally, those two numbers match. But when you claim zero depreciation, they don’t.

And the IRS notices.

How Skipping Depreciation Can Lead to Double Taxation

Let’s say this happens:

You should have claimed $5,000 of depreciation on your home office
You claim $0 because you’re trying to avoid recapture

Here’s what you’ve just done:

You gave up a $5,000 deduction
That means you paid more tax now than you needed to.
The IRS still treats that $5,000 as depreciation for basis purposes
Even though you didn’t claim it, the allowable depreciation reduces your basis in the home.

So, when you sell the house?

Your taxable gain is higher
You may pay capital gains tax on income you never actually benefited from

That’s how taxpayers end up paying tax twice on the same $5,000.

Not great.

“But What About the Home Sale Exclusion?”

At this point, someone usually says:

“Doesn’t Section 121 exclude the first $250,000 (or $500,000 if married) of gain anyway?”

Yes — sometimes.

If your home office is inside the walls of your primary residence, the Section 121 exclusion generally still applies to the overall gain.

But here are the important caveats:

Depreciation is not excluded just because the rest of the gain is
If the office is outside the dwelling unit (a detached structure), the exclusion may not apply at all to that portion
The math still requires you to reduce the basis by allowable depreciation, even if you didn’t claim it

So, while Section 121 can soften the blow in some cases, it doesn’t magically erase the underlying issue.

The Good News: You Can Avoid Recapture (Legitimately)

Now for the part most people never hear.

The tax code actually gives you a way out — if your records are clean.

Under IRC Section 1250(b)(3), depreciation recapture is limited to the amount of depreciation actually allowed, not merely allowable, if you can prove it.

And how do you prove it?

With your tax returns.

If your prior-year returns clearly show that:

You claimed a home office
You reported zero depreciation on Form 8829

Then those returns are considered adequate records.

That means:

No depreciation recapture tax, because the allowed amount was zero

That part works in your favor.

But There’s Still a Catch (There’s Always a Catch)

While the allowed-vs-allowable rule helps you avoid recapture, it does not help you when calculating gain on sale.

For gain purposes, the IRS requires you to reduce your basis by allowable depreciation, whether you claimed it or not.

So:

Recapture = based on allowed depreciation (good news)
Gain calculation = based on allowable depreciation (less good news)

Which means skipping depreciation can still increase your taxable gain when you sell — even though you never enjoyed the deduction in the first place.

Two Real-World Scenarios

Example 1: Gain Below the Exclusion

Home office inside the residence
Zero depreciation claimed (allowed)
$30,000 depreciation should have been claimed (allowable)
Total gain on sale: $230,000

Result:

No recapture tax
Gain remains under the $250,000 exclusion
No federal tax due

This is the best-case outcome for skipping depreciation — and it still required giving up years of deductions to get there.

Example 2: Gain Above the Exclusion

Same facts, except:

Total gain is $325,000
Taxpayer is single

Result:

No recapture tax (because allowed depreciation was zero)
But after reducing the basis by allowable depreciation, $75,000 exceeds the exclusion
That $75,000 is subject to capital gains tax (up to 20%)

So, you avoided recapture… but still paid tax — and gave up deductions along the way.

Why Skipping Depreciation Is Still a Bad Strategy

Even when skipping depreciation technically works, it usually fails financially.

Here’s why:

You lose real deductions today, when your tax rate is often higher
You lose the time value of money — cash now is more valuable than hypothetical savings later
Recapture is often taxed at a lower rate than your ordinary income
There are multiple ways to avoid recapture entirely, including:
- Step-up in basis at death
- Proper planning for future property use
- Strategic exchanges in certain situations

And one more thing no one likes to talk about:

Consistently reporting a home office without depreciation can look… unusual. Not illegal — but unusual enough to raise questions.