Writing off business use of your home can seem overwhelming. What’s business? What’s personal? Where do you draw the line when writing off business use of your home?
If you run your business in the United States, there are clear regulations and rules set up by the IRS to answer these questions.
Who can write off business use of the home
In general, you may qualify to deduct home expenses if you regularly and exclusively use your home office as your main place of business.
Regularly means that you use your home office as the primary place where you manage and administer your business. For example, you’re a grant writing consultant. You work from your home office for clients located all over the world. Or, for example, you’re a clutter consultant. You visit clients’ homes, but you run the administration of the business from your home office.
Exclusively means that you use a specific area of your home for business purposes only. You cannot use the area for both business and personal purposes. For example, doing all your work at the kitchen table does not qualify as exclusive use. This is because your kitchen table is also used for personal means. But doing all your work in a home office set up specifically for your business does qualify.
Check with the IRS for more detail and to learn about exceptions.
How much you can deduct when writing off business use of your home
Once you’ve figured whether you can write off business use of your home, it’s time to determine how much you can deduct.
The percentage that you can deduct is based on the size of your business space versus your personal space in your home.
For example, your home is 1000 square feet. Your home office measures 100 square feet. Your home office takes up 10% of your home. So you can deduct 10% of various types of expenses. In other words, in this example, your business percentage would be 10%.
What you can deduct
There are many expenses that you can deduct.
These can include
- depreciation;
- insurance;
- rent;
- repairs;
- security system;
- utilities; and/or
- services.
Generally, mortgage interest and real estate taxes cannot be deducted.
This article refers to US IRS guidelines only. Tax regulations differ from country to country and are subject to change. So be sure to check with an accountant or otherwise qualified professional about your specifics.