Question about schedule C deduction?

Home office expense.

That is not an expense. It is depreciated over time.

This would be a capital improvement. That means that you cannot deduct it all at one time. Even if a deduction is allowed, you would have to calculate and deduct only a small part of it, called the "depreciation", each year.

To deduct actual expenses you have to use Form 8829 to calculate your expenses. That calculation goes on line 30 of the Schedule C.

The expenses are based on the percentage of square footage of your home used as an office. It also takes into account the fact that remodeling your garage will increase the value of your home. In other words, if you spend $1,000 you will not be able to deduct anything near that.The simplified method is easier and may be a higher deduction. That way you deduct $5 per square foot of office space (up to $300 sq ft). 

Remodeling no. A % of expenses based on the area that is used specifically and solely for the business,maybe.  Ask your CPA.

Are converted garages legal in your city?

many places they aren't.

Let's pretend it is legal:

- remodeling your house is not a deductible expense on Schedule C; it may make your house more valuable when you sell the house and you would recoup the money then.

- you also don't get a home office deduction because you are in the garage and you are probably not paying property taxes on the area because it's non-livable space.  (of course, if you got it permitted that would be different).

In response to the comment:

Your landlord telling you that it's ok to covert the garage does not make it legal.  And if you don't have that permission in writing, expect him to change his mind when you move out.

That said, you can't take a home office deduction on this space, because you were paying rent on it as a garage, your rent hasn't changed, so there is no way to calculate the value of this space as a "home office".